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THE CORPORATION CODE OF THE PHILIPPINES

[Batas Pambansa Blg. 68] TITLE I GENERAL PROVISIONS Definitions and Classifications Section 1. Title of the Code. - This Code shall be known as "The Corporation Code of the Philippines". Sec. 2. Corporation defined. - A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. Sec. 3. Classes of corporations. - Corporations formed or organized under this Code may be stock or non-stock corporations. Corporations which have capital stock divided into shares and are authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock corporations. All other corporations are non-stock corporations. Sec. 4. Corporations created by special laws or charters. - Corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable. Such corporations created by the special laws are the goccs. If not gocc, such law is void for being violative of the constitution. Employees in goccs or those created with original charters (special law) are covered by the Civil Service Law, while those under general incorporation law (Corporation Code) are governed by the Labor Code. SEC has no jurisdiction over corporations with original charters but it can rule on the status of the corporation as to whether it is a gocc belonging to this type.

The mere fact that the government happens to be a majority stockholder of a corporation does not make it a public corporation.

Sec. 5. Corporators and incorporators, stockholders and members. Corporators are those who compose a corporation, whether as stockholders or as members. Incorporators are those stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and who are signatories thereof. Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-stock corporation are called members. Sec. 6. Classification of shares. - The shares of stock of stock corporations may be divided into classes or series of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those classified and issued as "preferred" or "redeemable" shares, unless otherwise provided in this Code: Provided, further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the shares or series of shares may have a par value or have no par value as may be provided for in the articles of incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building and loan associations shall not be permitted to issue no-par value shares of stock. Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of stock may be issued only with a stated par value. The board of directors, where authorized in the articles of incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such terms and conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided; That shares without par value may not be issued for a consideration less than the value of five (P5.00) pesos per share: Provided, further, That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and shall not be available for distribution as dividends. A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal requirements. Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be equal in all respects to every other share. Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of such shares shall nevertheless be entitled to vote on the following matters: 1. Amendment of the articles of incorporation; 2. Adoption and amendment of by-laws; 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property; 4. Incurring, creating or increasing bonded indebtedness; 5. Increase or decrease of capital stock; 6. Merger or consolidation of the corporation with another corporation or other corporations; 7. Investment of corporate funds in another corporation or business in accordance with this Code; and 8. Dissolution of the corporation. Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed to refer only to stocks with voting rights. Sec. 7. Founders' shares. - Founders' shares classified as such in the articles of incorporation may be given certain rights and privileges not enjoyed by the owners of other stocks, provided that where the exclusive right to vote and be voted for in the election of directors is granted, it must be for a limited period not to exceed five (5) years subject to the approval of the

Securities and Exchange Commission. The five-year period shall commence from the date of the aforesaid approval by the Securities and Exchange Commission. Sec. 8. Redeemable shares. - Redeemable shares may be issued by the corporation when expressly so provided in the articles of incorporation. They may be purchased or taken up by the corporation upon the expiration of a fixed period, regardless of the existence of unrestricted retained earnings in the books of the corporation, and upon such other terms and conditions as may be stated in the articles of incorporation, which terms and conditions must also be stated in the certificate of stock representing said shares. Sec. 9. Treasury shares. - Treasury shares are shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the board of directors. TITLE II INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS Sec. 10. Number and qualifications of incorporators. - Any number of natural persons not less than five (5) but not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private corporation for any lawful purpose or purposes. Each of the incorporators of s stock corporation must own or be a subscriber to at least one (1) share of the capital stock of the corporation. Sec. 11. Corporate term. - A corporation shall exist for a period not exceeding fifty (50) years from the date of incorporation unless sooner dissolved or unless said period is extended. The corporate term as originally stated in the articles of incorporation may be extended for periods not exceeding fifty (50) years in any single instance by an amendment of the articles of incorporation, in accordance with this Code; Provided, That no extension can be made earlier than five (5) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an earlier extension as may be determined by the Securities and Exchange Commission. Sec. 12. Minimum capital stock required of stock corporations. - Stock corporations incorporated under this Code shall not be required to have

any minimum authorized capital stock except as otherwise specifically provided for by special law, and subject to the provisions of the following section. Sec. 13. Amount of capital stock to be subscribed and paid for the purposes of incorporation. - At least twenty-five percent (25%) of the authorized capital stock as stated in the articles of incorporation must be subscribed at the time of incorporation, and at least twenty-five (25%) per cent of the total subscription must be paid upon subscription, the balance to be payable on a date or dates fixed in the contract of subscription without need of call, or in the absence of a fixed date or dates, upon call for payment by the board of directors: Provided, however, That in no case shall the paid-up capital be less than five Thousand (P5,000.00) pesos. Sec. 14. Contents of the articles of incorporation. - All corporations organized under this code shall file with the Securities and Exchange Commission articles of incorporation in any of the official languages duly signed and acknowledged by all of the incorporators, containing substantially the following matters, except as otherwise prescribed by this Code or by special law: 1. The name of the corporation; 2. The specific purpose or purposes for which the corporation is being incorporated. Where a corporation has more than one stated purpose, the articles of incorporation shall state which is the primary purpose and which is/are he secondary purpose or purposes: Provided, That a non-stock corporation may not include a purpose which would change or contradict its nature as such; 3. The place where the principal office of the corporation is to be located, which must be within the Philippines; 4. The term for which the corporation is to exist; 5. The names, nationalities and residences of the incorporators; 6. The number of directors or trustees, which shall not be less than five (5) nor more than fifteen (15); 7. The names, nationalities and residences of persons who shall act as directors or trustees until the first regular directors or trustees are duly elected and qualified in accordance with this Code;

8. If it be a stock corporation, the amount of its authorized capital stock in lawful money of the Philippines, the number of shares into which it is divided, and in case the share are par value shares, the par value of each, the names, nationalities and residences of the original subscribers, and the amount subscribed and paid by each on his subscription, and if some or all of the shares are without par value, such fact must be stated; 9. If it be a non-stock corporation, the amount of its capital, the names, nationalities and residences of the contributors and the amount contributed by each; and 10. Such other matters as are not inconsistent with law and which the incorporators may deem necessary and convenient. The Securities and Exchange Commission shall not accept the articles of incorporation of any stock corporation unless accompanied by a sworn statement of the Treasurer elected by the subscribers showing that at least twenty-five (25%) percent of the authorized capital stock of the corporation has been subscribed, and at least twenty-five (25%) of the total subscription has been fully paid to him in actual cash and/or in property the fair valuation of which is equal to at least twenty-five (25%) percent of the said subscription, such paid-up capital being not less than five thousand (P5,000.00) pesos. Sec. 15. Forms of Articles of Incorporation. - Unless otherwise prescribed by special law, articles of incorporation of all domestic corporations shall comply substantially with the following form:

ARTICLES OF INCORPORATION OF __________________________ (Name of Corporation) KNOW ALL MEN BY THESE PRESENTS: The undersigned incorporators, all of legal age and a majority of whom are residents of the Philippines, have this day voluntarily agreed to form a (stock) (non-stock) corporation under the laws of the Republic of the Philippines;

AND WE HEREBY CERTIFY: FIRST: That the name of said corporation shall be ".............................................., INC. or CORPORATION"; SECOND: That the purpose or purposes for which such corporation is incorporated are: (If there is more than one purpose, indicate primary and secondary purposes); THIRD: That the principal office of the corporation is located in the City/Municipality of ............................................., Province of .................................................., Philippines; FOURTH: That the term for which said corporation is to exist is ................ years from and after the date of issuance of the certificate of incorporation; FIFTH: That the names, nationalities and residences of the incorporators of the corporation are as follows: NAME NATIONALITY RESIDENCE ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... SIXTH: That the number of directors or trustees of the corporation shall be .............; and the names, nationalities and residences of the first directors or trustees of the corporation are as follows: NAME NATIONALITY RESIDENCE ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... SEVENTH: That the authorized capital stock of the corporation is ................................................. (P......................) PESOS in lawful money of the Philippines, divided into ............... shares with the par value of

................................... (P.......................) Pesos per share. (In case all the share are without par value): That the capital stock of the corporation is ........................... shares without par value. (In case some shares have par value and some are without par value): That the capital stock of said corporation consists of ........................ shares of which ....................... shares are of the par value of .............................. (P.....................) PESOS each, and of which ................................ shares are without par value. EIGHTH: That at least twenty five (25%) per cent of the authorized capital stock above stated has been subscribed as follows: Name of Subscriber Nationality No of Shares Amount Subscribed Subscribed .................................. .................... ........................ ....................... .................................. .................... ........................ ....................... .................................. .................... ........................ ....................... .................................. .................... ........................ ....................... .................................. .................... ........................ ....................... NINTH: That the above-named subscribers have paid at least twenty-five (25%) percent of the total subscription as follows: Name of Subscriber Amount Subscribed Total Paid-In ................................... ...................................... ............................... ................................... ...................................... ............................... ................................... ...................................... ............................... ................................... ...................................... ............................... ................................... ...................................... ............................... (Modify Nos. 8 and 9 if shares are with no par value. In case the corporation is non-stock, Nos. 7, 8 and 9 of the above articles may be modified accordingly, and it is sufficient if the articles state the amount of capital or money contributed or donated by specified persons, stating the names, nationalities and residences of the contributors or donors and the respective amount given by each.) TENTH: That ....................................... has been elected by the subscribers

as Treasurer of the Corporation to act as such until his successor is duly elected and qualified in accordance with the by-laws, and that as such Treasurer, he has been authorized to receive for and in the name and for the benefit of the corporation, all subscription (or fees) or contributions or donations paid or given by the subscribers or members. ELEVENTH: (Corporations which will engage in any business or activity reserved for Filipino citizens shall provide the following): "No transfer of stock or interest which shall reduce the ownership of Filipino citizens to less than the required percentage of the capital stock as provided by existing laws shall be allowed or permitted to recorded in the proper books of the corporation and this restriction shall be indicated in all stock certificates issued by the corporation." IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation, this ................... day of .............................., 19 ........... in the City/Municipality of ........................................, Province of ................................................., Republic of the Philippines. ............................................ ............................................. ............................................ ............................................. ................................................ (Names and signatures of the incorporators) SIGNED IN THE PRESENCE OF: ............................................ ............................................. (Notarial Acknowledgment) TREASURER'S AFFIDAVIT REPUBLIC OF THE PHILIPPINES ) CITY/MUNICIPALITY OF ) S.S. PROVINCE OF ) I, ...................................., being duly sworn, depose and say: That I have been elected by the subscribers of the corporation as Treasurer thereof, to act as such until my successor has been duly elected and qualified in accordance with the by-laws of the corporation, and that as such Treasurer, I hereby certify under oath that at least 25% of the

authorized capital stock of the corporation has been subscribed and at least 25% of the total subscription has been paid, and received by me, in cash or property, in the amount of not less than P5,000.00, in accordance with the Corporation Code. ....................................... (Signature of Treasurer) SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the City/Municipality of .................................. Province of .........................................., this ............. day of ........................., 19 ........; by ............................................ with Res. Cert. No. ..................... issued at ................. on ......................, 19 .......... NOTARY PUBLIC My commission expires on ..........................., 19 ........ Doc. No. ...............; Page No. ...............; Book No. ..............; Series of 19..... (7a) Sec. 16. Amendment of Articles of Incorporation. - Unless otherwise prescribed by this Code or by special law, and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting stockholders in accordance with the provisions of this Code, or the vote or written assent of at least two-thirds (2/3) of the members if it be a non-stock corporation. The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Such articles, as amended shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees stating the fact that said amendment or amendments have been duly approved by the required vote of the stockholders or members, shall be submitted to the Securities

and Exchange Commission. The amendments shall take effect upon their approval by the Securities and Exchange Commission or from the date of filing with the said Commission if not acted upon within six (6) months from the date of filing for a cause not attributable to the corporation. Sec. 17. Grounds when articles of incorporation or amendment may be rejected or disapproved. - The Securities and Exchange Commission may reject the articles of incorporation or disapprove any amendment thereto if the same is not in compliance with the requirements of this Code: Provided, That the Commission shall give the incorporators a reasonable time within which to correct or modify the objectionable portions of the articles or amendment. The following are grounds for such rejection or disapproval: 1. That the articles of incorporation or any amendment thereto is not substantially in accordance with the form prescribed herein; 2. That the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral, or contrary to government rules and regulations; 3. That the Treasurer's Affidavit concerning the amount of capital stock subscribed and/or paid if false; 4. That the percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been complied with as required by existing laws or the Constitution. No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-banking institutions, building and loan associations, trust companies and other financial intermediaries, insurance companies, public utilities, educational institutions, and other corporations governed by special laws shall be accepted or approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency to the effect that such articles or amendment is in accordance with law. Sec. 18. Corporate name. - No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the corporate

name is approved, the Commission shall issue an amended certificate of incorporation under the amended name. Sec. 19. Commencement of corporate existence. - A private corporation formed or organized under this Code commences to have corporate existence and juridical personality and is deemed incorporated from the date the Securities and Exchange Commission issues a certificate of incorporation under its official seal; and thereupon the incorporators, stockholders/members and their successors shall constitute a body politic and corporate under the name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or the corporation is sooner dissolved in accordance with law. Sec. 20. De facto corporations. - The due incorporation of any corporation claiming in good faith to be a corporation under this Code, and its right to exercise corporate powers, shall not be inquired into collaterally in any private suit to which such corporation may be a party. Such inquiry may be made by the Solicitor General in a quo warranto proceeding. Sec. 21. Corporation by estoppel. - All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof: Provided, however, That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate personality. On who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation. Sec. 22. Effects on non-use of corporate charter and continuous inoperation of a corporation. - If a corporation does not formally organize and commence the transaction of its business or the construction of its works within two (2) years from the date of its incorporation, its corporate powers cease and the corporation shall be deemed dissolved. However, if a corporation has commenced the transaction of its business but subsequently becomes continuously inoperative for a period of at least five (5) years, the same shall be a ground for the suspension or revocation of its corporate franchise or certificate of incorporation. This provision shall not apply if the failure to organize, commence the

transaction of its businesses or the construction of its works, or to continuously operate is due to causes beyond the control of the corporation as may be determined by the Securities and Exchange Commission. TITLE III BOARD OF DIRECTORS/TRUSTEES/OFFICERS Sec. 23. The board of directors or trustees. - Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified. Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. Trustees of non-stock corporations must be members thereof. a majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines. Sec. 24. Election of directors or trustees. - At all elections of directors or trustees, there must be present, either in person or by representative authorized to act by written proxy, the owners of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the members entitled to vote. The election must be by ballot if requested by any voting stockholder or member. In stock corporations, every stockholder entitled to vote shall have the right to vote in person or by proxy the number of shares of stock standing, at the time fixed in the by-laws, in his own name on the stock books of the corporation, or where the by-laws are silent, at the time of the election; and said stockholder may vote such number of shares for as many persons as there are directors to be elected or he may cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit: Provided, That the total number of votes cast by him shall not exceed the number of shares owned by him as

shown in the books of the corporation multiplied by the whole number of directors to be elected: Provided, however, That no delinquent stock shall be voted. Unless otherwise provided in the articles of incorporation or in the by-laws, members of corporations which have no capital stock may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate. Candidates receiving the highest number of votes shall be declared elected. Any meeting of the stockholders or members called for an election may adjourn from day to day or from time to time but not sine die or indefinitely if, for any reason, no election is held, or if there not present or represented by proxy, at the meeting, the owners of a majority of the outstanding capital stock, or if there be no capital stock, a majority of the member entitled to vote. Sec. 25. Corporate officers, quorum. - Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time. The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board. Directors or trustees cannot attend or vote by proxy at board meetings. Sec. 26. Report of election of directors, trustees and officers. - Within thirty (30) days after the election of the directors, trustees and officers of the corporation, the secretary, or any other officer of the corporation, shall submit to the Securities and Exchange Commission, the names, nationalities and residences of the directors, trustees, and officers elected. Should a director, trustee or officer die, resign or in any manner cease to hold office, his heirs in case of his death, the secretary, or any other officer

of the corporation, or the director, trustee or officer himself, shall immediately report such fact to the Securities and Exchange Commission. Sec. 27. Disqualification of directors, trustees or officers. - No person convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of this Code committed within five (5) years prior to the date of his election or appointment, shall qualify as a director, trustee or officer of any corporation. Sec. 28. Removal of directors or trustees. - Any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or if the corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the members entitled to vote: Provided, That such removal shall take place either at a regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal of directors or trustees, or any of them, must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock, or, if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote. Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well as of the intention to propose such removal, must be given by publication or by written notice prescribed in this Code. Removal may be with or without cause: Provided, That removal without cause may not be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 24 of this Code. Sec. 29. Vacancies in the office of director or trustee. - Any vacancy occurring in the board of directors or trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must be filled by the

stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to fill a vacancy shall be elected only or the unexpired term of his predecessor in office. A directorship or trusteeship to be filled by reason of an increase in the number of directors or trustees shall be filled only by an election at a regular or at a special meeting of stockholders or members duly called for the purpose, or in the same meeting authorizing the increase of directors or trustees if so stated in the notice of the meeting. Sec. 30. Compensation of directors. - In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation, as such directors, except for reasonable pre diems: Provided, however, That any such compensation other than per diems may be granted to directors by the vote of the stockholders representing at least a majority of the outstanding capital stock at a regular or special stockholders' meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year. Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. Sec. 32. Dealings of directors, trustees or officers with the corporation. - A contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present: 1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum

for such meeting; 2. That the vote of such director or trustee was nor necessary for the approval of the contract; 3. That the contract is fair and reasonable under the circumstances; and 4. That in case of an officer, the contract has been previously authorized by the board of directors. Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least twothirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract is fair and reasonable under the circumstances. Sec. 33. Contracts between corporations with interlocking directors. Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking director in one corporation is substantial and his interest in the other corporation or corporations is merely nominal, he shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are concerned. Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be considered substantial for purposes of interlocking directors. Sec. 34. Disloyalty of a director. - Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. Sec. 35. Executive committee. - The by-laws of a corporation may create an executive committee, composed of not less than three members of the board, to be appointed by the board. Said committee may act, by majority vote of all its members, on such specific matters within the competence of

the board, as may be delegated to it in the by-laws or on a majority vote of the board, except with respect to: (1) approval of any action for which shareholders' approval is also required; (2) the filing of vacancies in the board; (3) the amendment or repeal of by-laws or the adoption of new bylaws; (4) the amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable; and (5) a distribution of cash dividends to the shareholders. TITLE IV POWERS OF CORPORATIONS Sec. 36. Corporate powers and capacity. - Every corporation incorporated under this Code has the power and capacity: 1. To sue and be sued in its corporate name; 2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of incorporation; 3. To adopt and use a corporate seal; 4. To amend its articles of incorporation in accordance with the provisions of this Code; 5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this Code; 6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a non-stock corporation; 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution; 8. To enter into merger or consolidation with other corporations as provided in this Code; 9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations in

aid of any political party or candidate or for purposes of partisan political activity; 10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; and 11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in the articles of incorporation. Sec. 37. Power to extend or shorten corporate term. - A private corporation may extend or shorten its term as stated in the articles of incorporation when approved by a majority vote of the board of directors or trustees and ratified at a meeting by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least twothirds (2/3) of the members in case of non-stock corporations. Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That in case of extension of corporate term, any dissenting stockholder may exercise his appraisal right under the conditions provided in this code. (n) Sec. 38. Power to increase or decrease capital stock; incur, create or increase bonded indebtedness. - No corporation shall increase or decrease its capital stock or incur, create or increase any bonded indebtedness unless approved by a majority vote of the board of directors and, at a stockholder's meeting duly called for the purpose, two-thirds (2/3) of the outstanding capital stock shall favor the increase or diminution of the capital stock, or the incurring, creating or increasing of any bonded indebtedness. Written notice of the proposed increase or diminution of the capital stock or of the incurring, creating, or increasing of any bonded indebtedness and of the time and place of the stockholder's meeting at which the proposed increase or diminution of the capital stock or the incurring or increasing of any bonded indebtedness is to be considered, must be addressed to each stockholder at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally. A certificate in duplicate must be signed by a majority of the directors of the corporation and countersigned by the chairman and the secretary of the stockholders' meeting, setting forth:

(1) That the requirements of this section have been complied with; (2) The amount of the increase or diminution of the capital stock; (3) If an increase of the capital stock, the amount of capital stock or number of shares of no-par stock thereof actually subscribed, the names, nationalities and residences of the persons subscribing, the amount of capital stock or number of no-par stock subscribed by each, and the amount paid by each on his subscription in cash or property, or the amount of capital stock or number of shares of no-par stock allotted to each stockholder if such increase is for the purpose of making effective stock dividend therefor authorized; (4) Any bonded indebtedness to be incurred, created or increased; (5) The actual indebtedness of the corporation on the day of the meeting; (6) The amount of stock represented at the meeting; and (7) The vote authorizing the increase or diminution of the capital stock, or the incurring, creating or increasing of any bonded indebtedness. Any increase or decrease in the capital stock or the incurring, creating or increasing of any bonded indebtedness shall require prior approval of the Securities and Exchange Commission. One of the duplicate certificates shall be kept on file in the office of the corporation and the other shall be filed with the Securities and Exchange Commission and attached to the original articles of incorporation. From and after approval by the Securities and Exchange Commission and the issuance by the Commission of its certificate of filing, the capital stock shall stand increased or decreased and the incurring, creating or increasing of any bonded indebtedness authorized, as the certificate of filing may declare: Provided, That the Securities and Exchange Commission shall not accept for filing any certificate of increase of capital stock unless accompanied by the sworn statement of the treasurer of the corporation lawfully holding office at the time of the filing of the certificate, showing that at least twenty-five (25%) percent of such increased capital stock has been subscribed and that at least twenty-five (25%) percent of the amount subscribed has been paid either in actual cash to the corporation or that there has been transferred to the corporation property the valuation of which is equal to twenty-five (25%) percent of the subscription: Provided, further, That no decrease of the capital stock shall be approved by the

Commission if its effect shall prejudice the rights of corporate creditors. Non-stock corporations may incur or create bonded indebtedness, or increase the same, with the approval by a majority vote of the board of trustees and of at least two-thirds (2/3) of the members in a meeting duly called for the purpose. Bonds issued by a corporation shall be registered with the Securities and Exchange Commission, which shall have the authority to determine the sufficiency of the terms thereof. (17a) Sec. 39. Power to deny pre-emptive right. - All stockholders of a stock corporation shall enjoy pre-emptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is denied by the articles of incorporation or an amendment thereto: Provided, That such pre-emptive right shall not extend to shares to be issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or to shares to be issued in good faith with the approval of the stockholders representing two-thirds (2/3) of the outstanding capital stock, in exchange for property needed for corporate purposes or in payment of a previously contracted debt. Sec. 40. Sale or other disposition of assets. - Subject to the provisions of existing laws on illegal combinations and monopolies, a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets, including its goodwill, upon such terms and conditions and for such consideration, which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient, when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or in case of non-stock corporation, by the vote of at least to two-thirds (2/3) of the members, in a stockholder's or member's meeting duly called for the purpose. Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That any dissenting stockholder may exercise his appraisal right under the conditions provided in this Code.

A sale or other disposition shall be deemed to cover substantially all the corporate property and assets if thereby the corporation would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated. After such authorization or approval by the stockholders or members, the board of directors or trustees may, nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage, pledge or other disposition of property and assets, subject to the rights of third parties under any contract relating thereto, without further action or approval by the stockholders or members. Nothing in this section is intended to restrict the power of any corporation, without the authorization by the stockholders or members, to sell, lease, exchange, mortgage, pledge or otherwise dispose of any of its property and assets if the same is necessary in the usual and regular course of business of said corporation or if the proceeds of the sale or other disposition of such property and assets be appropriated for the conduct of its remaining business. In non-stock corporations where there are no members with voting rights, the vote of at least a majority of the trustees in office will be sufficient authorization for the corporation to enter into any transaction authorized by this section. (28 1/2a) Sec. 41. Power to acquire own shares. - A stock corporation shall have the power to purchase or acquire its own shares for a legitimate corporate purpose or purposes, including but not limited to the following cases: Provided, That the corporation has unrestricted retained earnings in its books to cover the shares to be purchased or acquired: 1. To eliminate fractional shares arising out of stock dividends; 2. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold during said sale; and 3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the provisions of this Code. (n) Sec. 42. Power to invest corporate funds in another corporation or business or for any other purpose. - Subject to the provisions of this Code,

a private corporation may invest its funds in any other corporation or business or for any purpose other than the primary purpose for which it was organized when approved by a majority of the board of directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or by at least two thirds (2/3) of the members in the case of non-stock corporations, at a stockholder's or member's meeting duly called for the purpose. Written notice of the proposed investment and the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That any dissenting stockholder shall have appraisal right as provided in this Code: Provided, however, That where the investment by the corporation is reasonably necessary to accomplish its primary purpose as stated in the articles of incorporation, the approval of the stockholders or members shall not be necessary. (17 1/2a) Sec. 43. Power to declare dividends. - The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, in property, or in stock to all stockholders on the basis of outstanding stock held by them: Provided, That any cash dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses, while stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid: Provided, further, That no stock dividend shall be issued without the approval of stockholders representing not less than two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly called for the purpose. (16a) Stock corporations are prohibited from retaining surplus profits in excess of one hundred (100%) percent of their paid-in capital stock, except: (1) when justified by definite corporate expansion projects or programs approved by the board of directors; or (2) when the corporation is prohibited under any loan agreement with any financial institution or creditor, whether local or foreign, from declaring dividends without its/his consent, and such consent has not yet been secured; or (3) when it can be clearly shown that such retention is necessary under special circumstances obtaining in the corporation, such as when there is need for special reserve for probable contingencies. (n)

Sec. 44. Power to enter into management contract. - No corporation shall conclude a management contract with another corporation unless such contract shall have been approved by the board of directors and by stockholders owning at least the majority of the outstanding capital stock, or by at least a majority of the members in the case of a non-stock corporation, of both the managing and the managed corporation, at a meeting duly called for the purpose: Provided, That (1) where a stockholder or stockholders representing the same interest of both the managing and the managed corporations own or control more than one-third (1/3) of the total outstanding capital stock entitled to vote of the managing corporation; or (2) where a majority of the members of the board of directors of the managing corporation also constitute a majority of the members of the board of directors of the managed corporation, then the management contract must be approved by the stockholders of the managed corporation owning at least two-thirds (2/3) of the total outstanding capital stock entitled to vote, or by at least two-thirds (2/3) of the members in the case of a non-stock corporation. No management contract shall be entered into for a period longer than five years for any one term. The provisions of the next preceding paragraph shall apply to any contract whereby a corporation undertakes to manage or operate all or substantially all of the business of another corporation, whether such contracts are called service contracts, operating agreements or otherwise: Provided, however, That such service contracts or operating agreements which relate to the exploration, development, exploitation or utilization of natural resources may be entered into for such periods as may be provided by the pertinent laws or regulations. (n) Sec. 45. Ultra vires acts of corporations. - No corporation under this Code shall possess or exercise any corporate powers except those conferred by this Code or by its articles of incorporation and except such as are necessary or incidental to the exercise of the powers so conferred. (n) TITLE V BY LAWS Sec. 46. Adoption of by-laws. - Every corporation formed under this Code must, within one (1) month after receipt of official notice of the issuance of its certificate of incorporation by the Securities and Exchange Commission, adopt a code of by-laws for its government not inconsistent with this Code.

For the adoption of by-laws by the corporation the affirmative vote of the stockholders representing at least a majority of the outstanding capital stock, or of at least a majority of the members in case of non-stock corporations, shall be necessary. The by-laws shall be signed by the stockholders or members voting for them and shall be kept in the principal office of the corporation, subject to the inspection of the stockholders or members during office hours. A copy thereof, duly certified to by a majority of the directors or trustees countersigned by the secretary of the corporation, shall be filed with the Securities and Exchange Commission which shall be attached to the original articles of incorporation. Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted and filed prior to incorporation; in such case, such by-laws shall be approved and signed by all the incorporators and submitted to the Securities and Exchange Commission, together with the articles of incorporation. In all cases, by-laws shall be effective only upon the issuance by the Securities and Exchange Commission of a certification that the by-laws are not inconsistent with this Code. The Securities and Exchange Commission shall not accept for filing the bylaws or any amendment thereto of any bank, banking institution, building and loan association, trust company, insurance company, public utility, educational institution or other special corporations governed by special laws, unless accompanied by a certificate of the appropriate government agency to the effect that such by-laws or amendments are in accordance with law. (20a) Sec. 47. Contents of by-laws. - Subject to the provisions of the Constitution, this Code, other special laws, and the articles of incorporation, a private corporation may provide in its by-laws for: 1. The time, place and manner of calling and conducting regular or special meetings of the directors or trustees; 2. The time and manner of calling and conducting regular or special meetings of the stockholders or members; 3. The required quorum in meetings of stockholders or members and the manner of voting therein; 4. The form for proxies of stockholders and members and the manner of

voting them; 5. The qualifications, duties and compensation of directors or trustees, officers and employees; 6. The time for holding the annual election of directors of trustees and the mode or manner of giving notice thereof; 7. The manner of election or appointment and the term of office of all officers other than directors or trustees; 8. The penalties for violation of the by-laws; 9. In the case of stock corporations, the manner of issuing stock certificates; and 10. Such other matters as may be necessary for the proper or convenient transaction of its corporate business and affairs. (21a) Sec. 48. Amendments to by-laws. - The board of directors or trustees, by a majority vote thereof, and the owners of at least a majority of the outstanding capital stock, or at least a majority of the members of a nonstock corporation, at a regular or special meeting duly called for the purpose, may amend or repeal any by-laws or adopt new by-laws. The owners of two-thirds (2/3) of the outstanding capital stock or two-thirds (2/3) of the members in a non-stock corporation may delegate to the board of directors or trustees the power to amend or repeal any by-laws or adopt new by-laws: Provided, That any power delegated to the board of directors or trustees to amend or repeal any by-laws or adopt new by-laws shall be considered as revoked whenever stockholders owning or representing a majority of the outstanding capital stock or a majority of the members in non-stock corporations, shall so vote at a regular or special meeting. Whenever any amendment or new by-laws are adopted, such amendment or new by-laws shall be attached to the original by-laws in the office of the corporation, and a copy thereof, duly certified under oath by the corporate secretary and a majority of the directors or trustees, shall be filed with the Securities and Exchange Commission the same to be attached to the original articles of incorporation and original by-laws. The amended or new by-laws shall only be effective upon the issuance by the Securities and Exchange Commission of a certification that the same are not inconsistent with this Code. (22a and 23a) TITLE VI

MEETINGS Sec. 49. Kinds of meetings. - Meetings of directors, trustees, stockholders, or members may be regular or special. (n) Sec. 50. Regular and special meetings of stockholders or members. Regular meetings of stockholders or members shall be held annually on a date fixed in the by-laws, or if not so fixed, on any date in April of every year as determined by the board of directors or trustees: Provided, That written notice of regular meetings shall be sent to all stockholders or members of record at least two (2) weeks prior to the meeting, unless a different period is required by the by-laws. Special meetings of stockholders or members shall be held at any time deemed necessary or as provided in the by-laws: Provided, however, That at least one (1) week written notice shall be sent to all stockholders or members, unless otherwise provided in the by-laws. Notice of any meeting may be waived, expressly or impliedly, by any stockholder or member. Whenever, for any cause, there is no person authorized to call a meeting, the Secretaries and Exchange Commission, upon petition of a stockholder or member on a showing of good cause therefor, may issue an order to the petitioning stockholder or member directing him to call a meeting of the corporation by giving proper notice required by this Code or by the by-laws. The petitioning stockholder or member shall preside thereat until at least a majority of the stockholders or members present have been chosen one of their number as presiding officer. (24, 26) Sec. 51. Place and time of meetings of stockholders or members. Stockholders' or members' meetings, whether regular or special, shall be held in the city or municipality where the principal office of the corporation is located, and if practicable in the principal office of the corporation: Provided, That Metro Manila shall, for purposes of this section, be considered a city or municipality. Notice of meetings shall be in writing, and the time and place thereof stated therein. All proceedings had and any business transacted at any meeting of the stockholders or members, if within the powers or authority of the corporation, shall be valid even if the meeting be improperly held or called, provided all the stockholders or members of the corporation are present or

duly represented at the meeting. (24 and 25) Sec. 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in the case of non-stock corporations. (n) Sec. 53. Regular and special meetings of directors or trustees. - Regular meetings of the board of directors or trustees of every corporation shall be held monthly, unless the by-laws provide otherwise. Special meetings of the board of directors or trustees may be held at any time upon the call of the president or as provided in the by-laws. Meetings of directors or trustees of corporations may be held anywhere in or outside of the Philippines, unless the by-laws provide otherwise. Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or trustee at least one (1) day prior to the scheduled meeting, unless otherwise provided by the by-laws. A director or trustee may waive this requirement, either expressly or impliedly. (n) Sec. 54. Who shall preside at meetings. - The president shall preside at all meetings of the directors or trustee as well as of the stockholders or members, unless the by-laws provide otherwise. (n) Sec. 55. Right to vote of pledgors, mortgagors, and administrators. - In case of pledged or mortgaged shares in stock corporations, the pledgor or mortgagor shall have the right to attend and vote at meetings of stockholders, unless the pledgee or mortgagee is expressly given by the pledgor or mortgagor such right in writing which is recorded on the appropriate corporate books. (n) Executors, administrators, receivers, and other legal representatives duly appointed by the court may attend and vote in behalf of the stockholders or members without need of any written proxy. (27a) Sec. 56. Voting in case of joint ownership of stock. - In case of shares of stock owned jointly by two or more persons, in order to vote the same, the consent of all the co-owners shall be necessary, unless there is a written proxy, signed by all the co-owners, authorizing one or some of them or any other person to vote such share or shares: Provided, That when the shares are owned in an "and/or" capacity by the holders thereof, any one of the

joint owners can vote said shares or appoint a proxy therefor. (n) Sec. 57. Voting right for treasury shares. - Treasury shares shall have no voting right as long as such shares remain in the Treasury. (n) Sec. 58. Proxies. - Stockholders and members may vote in person or by proxy in all meetings of stockholders or members. Proxies shall in writing, signed by the stockholder or member and filed before the scheduled meeting with the corporate secretary. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at any one time. (n) Sec. 59. Voting trusts. - One or more stockholders of a stock corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote and other rights pertaining to the shares for a period not exceeding five (5) years at any time: Provided, That in the case of a voting trust specifically required as a condition in a loan agreement, said voting trust may be for a period exceeding five (5) years but shall automatically expire upon full payment of the loan. A voting trust agreement must be in writing and notarized, and shall specify the terms and conditions thereof. A certified copy of such agreement shall be filed with the corporation and with the Securities and Exchange Commission; otherwise, said agreement is ineffective and unenforceable. The certificate or certificates of stock covered by the voting trust agreement shall be canceled and new ones shall be issued in the name of the trustee or trustees stating that they are issued pursuant to said agreement. In the books of the corporation, it shall be noted that the transfer in the name of the trustee or trustees is made pursuant to said voting trust agreement. The trustee or trustees shall execute and deliver to the transferors voting trust certificates, which shall be transferable in the same manner and with the same effect as certificates of stock. The voting trust agreement filed with the corporation shall be subject to examination by any stockholder of the corporation in the same manner as any other corporate book or record: Provided, That both the transferor and the trustee or trustees may exercise the right of inspection of all corporate books and records in accordance with the provisions of this Code. Any other stockholder may transfer his shares to the same trustee or trustees upon the terms and conditions stated in the voting trust

agreement, and thereupon shall be bound by all the provisions of said agreement. No voting trust agreement shall be entered into for the purpose of circumventing the law against monopolies and illegal combinations in restraint of trade or used for purposes of fraud. Unless expressly renewed, all rights granted in a voting trust agreement shall automatically expire at the end of the agreed period, and the voting trust certificates as well as the certificates of stock in the name of the trustee or trustees shall thereby be deemed canceled and new certificates of stock shall be reissued in the name of the transferors. The voting trustee or trustees may vote by proxy unless the agreement provides otherwise. (36a) TITLE VII STOCKS AND STOCKHOLDERS Sec. 60. Subscription contract. - Any contract for the acquisition of unissued stock in an existing corporation or a corporation still to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding the fact that the parties refer to it as a purchase or some other contract. (n) Sec. 61. Pre-incorporation subscription. - A subscription for shares of stock of a corporation still to be formed shall be irrevocable for a period of at least six (6) months from the date of subscription, unless all of the other subscribers consent to the revocation, or unless the incorporation of said corporation fails to materialize within said period or within a longer period as may be stipulated in the contract of subscription: Provided, That no preincorporation subscription may be revoked after the submission of the articles of incorporation to the Securities and Exchange Commission. (n) Sec. 62. Considering for stocks. - Stocks shall not be issued for a consideration less than the par or issued price thereof. Consideration for the issuance of stock may be any or a combination of any two or more of the following: 1. Actual cash paid to the corporation; 2. Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued;

3. Labor performed for or services actually rendered to the corporation; 4. Previously incurred indebtedness of the corporation; 5. Amounts transferred from unrestricted retained earnings to stated capital; and 6. Outstanding shares exchanged for stocks in the event of reclassification or conversion. Where the consideration is other than actual cash, or consists of intangible property such as patents of copyrights, the valuation thereof shall initially be determined by the incorporators or the board of directors, subject to approval by the Securities and Exchange Commission. Shares of stock shall not be issued in exchange for promissory notes or future service. The same considerations provided for in this section, insofar as they may be applicable, may be used for the issuance of bonds by the corporation. The issued price of no-par value shares may be fixed in the articles of incorporation or by the board of directors pursuant to authority conferred upon it by the articles of incorporation or the by-laws, or in the absence thereof, by the stockholders representing at least a majority of the outstanding capital stock at a meeting duly called for the purpose. (5 and 16) Sec. 63. Certificate of stock and transfer of shares. - The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates endorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred. No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation. (35) Sec. 64. Issuance of stock certificates. - No certificate of stock shall be

issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid. (37) Sec. 65. Liability of directors for watered stocks. - Any director or officer of a corporation consenting to the issuance of stocks for a consideration less than its par or issued value or for a consideration in any form other than cash, valued in excess of its fair value, or who, having knowledge thereof, does not forthwith express his objection in writing and file the same with the corporate secretary, shall be solidarily, liable with the stockholder concerned to the corporation and its creditors for the difference between the fair value received at the time of issuance of the stock and the par or issued value of the same. (n) Sec. 66. Interest on unpaid subscriptions. - Subscribers for stock shall pay to the corporation interest on all unpaid subscriptions from the date of subscription, if so required by, and at the rate of interest fixed in the bylaws. If no rate of interest is fixed in the by-laws, such rate shall be deemed to be the legal rate. (37) Sec. 67. Payment of balance of subscription. - Subject to the provisions of the contract of subscription, the board of directors of any stock corporation may at any time declare due and payable to the corporation unpaid subscriptions to the capital stock and may collect the same or such percentage thereof, in either case with accrued interest, if any, as it may deem necessary. Payment of any unpaid subscription or any percentage thereof, together with the interest accrued, if any, shall be made on the date specified in the contract of subscription or on the date stated in the call made by the board. Failure to pay on such date shall render the entire balance due and payable and shall make the stockholder liable for interest at the legal rate on such balance, unless a different rate of interest is provided in the by-laws, computed from such date until full payment. If within thirty (30) days from the said date no payment is made, all stocks covered by said subscription shall thereupon become delinquent and shall be subject to sale as hereinafter provided, unless the board of directors orders otherwise. (38) Sec. 68. Delinquency sale. - The board of directors may, by resolution, order the sale of delinquent stock and shall specifically state the amount due on each subscription plus all accrued interest, and the date, time and place of the sale which shall not be less than thirty (30) days nor more than

sixty (60) days from the date the stocks become delinquent. Notice of said sale, with a copy of the resolution, shall be sent to every delinquent stockholder either personally or by registered mail. The same shall furthermore be published once a week for two (2) consecutive weeks in a newspaper of general circulation in the province or city where the principal office of the corporation is located. Unless the delinquent stockholder pays to the corporation, on or before the date specified for the sale of the delinquent stock, the balance due on his subscription, plus accrued interest, costs of advertisement and expenses of sale, or unless the board of directors otherwise orders, said delinquent stock shall be sold at public auction to such bidder who shall offer to pay the full amount of the balance on the subscription together with accrued interest, costs of advertisement and expenses of sale, for the smallest number of shares or fraction of a share. The stock so purchased shall be transferred to such purchaser in the books of the corporation and a certificate for such stock shall be issued in his favor. The remaining shares, if any, shall be credited in favor of the delinquent stockholder who shall likewise be entitled to the issuance of a certificate of stock covering such shares. Should there be no bidder at the public auction who offers to pay the full amount of the balance on the subscription together with accrued interest, costs of advertisement and expenses of sale, for the smallest number of shares or fraction of a share, the corporation may, subject to the provisions of this Code, bid for the same, and the total amount due shall be credited as paid in full in the books of the corporation. Title to all the shares of stock covered by the subscription shall be vested in the corporation as treasury shares and may be disposed of by said corporation in accordance with the provisions of this Code. Sec. 69. When sale may be questioned. - No action to recover delinquent stock sold can be sustained upon the ground of irregularity or defect in the notice of sale, or in the sale itself of the delinquent stock, unless the party seeking to maintain such action first pays or tenders to the party holding the stock the sum for which the same was sold, with interest from the date of sale at the legal rate; and no such action shall be maintained unless it is commenced by the filing of a complaint within six (6) months from the date of sale. (47a) Sec. 70. Court action to recover unpaid subscription. - Nothing in this Code

shall prevent the corporation from collecting by action in a court of proper jurisdiction the amount due on any unpaid subscription, with accrued interest, costs and expenses. (49a) Sec. 71. Effect of delinquency. - No delinquent stock shall be voted for be entitled to vote or to representation at any stockholder's meeting, nor shall the holder thereof be entitled to any of the rights of a stockholder except the right to dividends in accordance with the provisions of this Code, until and unless he pays the amount due on his subscription with accrued interest, and the costs and expenses of advertisement, if any. (50a) Sec. 72. Rights of unpaid shares. - Holders of subscribed shares not fully paid which are not delinquent shall have all the rights of a stockholder. (n) Sec. 73. Lost or destroyed certificates. - The following procedure shall be followed for the issuance by a corporation of new certificates of stock in lieu of those which have been lost, stolen or destroyed: 1. The registered owner of a certificate of stock in a corporation or his legal representative shall file with the corporation an affidavit in triplicate setting forth, if possible, the circumstances as to how the certificate was lost, stolen or destroyed, the number of shares represented by such certificate, the serial number of the certificate and the name of the corporation which issued the same. He shall also submit such other information and evidence which he may deem necessary; 2. After verifying the affidavit and other information and evidence with the books of the corporation, said corporation shall publish a notice in a newspaper of general circulation published in the place where the corporation has its principal office, once a week for three (3) consecutive weeks at the expense of the registered owner of the certificate of stock which has been lost, stolen or destroyed. The notice shall state the name of said corporation, the name of the registered owner and the serial number of said certificate, and the number of shares represented by such certificate, and that after the expiration of one (1) year from the date of the last publication, if no contest has been presented to said corporation regarding said certificate of stock, the right to make such contest shall be barred and said corporation shall cancel in its books the certificate of stock which has been lost, stolen or destroyed and issue in lieu thereof new certificate of stock, unless the registered owner files a bond or other security in lieu thereof as may be required, effective for a period of one (1) year, for such amount and in such form and with such sureties as may be

satisfactory to the board of directors, in which case a new certificate may be issued even before the expiration of the one (1) year period provided herein: Provided, That if a contest has been presented to said corporation or if an action is pending in court regarding the ownership of said certificate of stock which has been lost, stolen or destroyed, the issuance of the new certificate of stock in lieu thereof shall be suspended until the final decision by the court regarding the ownership of said certificate of stock which has been lost, stolen or destroyed. Except in case of fraud, bad faith, or negligence on the part of the corporation and its officers, no action may be brought against any corporation which shall have issued certificate of stock in lieu of those lost, stolen or destroyed pursuant to the procedure above-described. (R. A. 201a) TITLE VIII CORPORATE BOOKS AND RECORDS Sec. 74. Books to be kept; stock transfer agent. - Every corporation shall keep and carefully preserve at its principal office a record of all business transactions and minutes of all meetings of stockholders or members, or of the board of directors or trustees, in which shall be set forth in detail the time and place of holding the meeting, how authorized, the notice given, whether the meeting was regular or special, if special its object, those present and absent, and every act done or ordered done at the meeting. Upon the demand of any director, trustee, stockholder or member, the time when any director, trustee, stockholder or member entered or left the meeting must be noted in the minutes; and on a similar demand, the yeas and nays must be taken on any motion or proposition, and a record thereof carefully made. The protest of any director, trustee, stockholder or member on any action or proposed action must be recorded in full on his demand. The records of all business transactions of the corporation and the minutes of any meetings shall be open to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, writing, for a copy of excerpts from said records or minutes, at his expense. Any officer or agent of the corporation who shall refuse to allow any director, trustees, stockholder or member of the corporation to examine

and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is made pursuant to a resolution or order of the board of directors or trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal: and Provided, further, That it shall be a defense to any action under this section that the person demanding to examine and copy excerpts from the corporation's records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand. Stock corporations must also keep a book to be known as the "stock and transfer book", in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours on business days. No stock transfer agent or one engaged principally in the business of registering transfers of stocks in behalf of a stock corporation shall be allowed to operate in the Philippines unless he secures a license from the Securities and Exchange Commission and pays a fee as may be fixed by the Commission, which shall be renewable annually: Provided, That a stock corporation is not precluded from performing or making transfer of its own stocks, in which case all the rules and regulations imposed on stock transfer agents, except the payment of a license fee herein provided, shall be applicable. (51a and 32a; B. P. No. 268.) Sec. 75. Right to financial statements. - Within ten (10) days from receipt of a written request of any stockholder or member, the corporation shall furnish to him its most recent financial statement, which shall include a balance sheet as of the end of the last taxable year and a profit or loss statement for said taxable year, showing in reasonable detail its assets and

liabilities and the result of its operations. At the regular meeting of stockholders or members, the board of directors or trustees shall present to such stockholders or members a financial report of the operations of the corporation for the preceding year, which shall include financial statements, duly signed and certified by an independent certified public accountant. However, if the paid-up capital of the corporation is less than P50,000.00, the financial statements may be certified under oath by the treasurer or any responsible officer of the corporation. (n) TITLE IX MERGER AND CONSOLIDATION Sec. 76. Plan or merger of consolidation. - Two or more corporations may merge into a single corporation which shall be one of the constituent corporations or may consolidate into a new single corporation which shall be the consolidated corporation. The board of directors or trustees of each corporation, party to the merger or consolidation, shall approve a plan of merger or consolidation setting forth the following: 1. The names of the corporations proposing to merge or consolidate, hereinafter referred to as the constituent corporations; 2. The terms of the merger or consolidation and the mode of carrying the same into effect; 3. A statement of the changes, if any, in the articles of incorporation of the surviving corporation in case of merger; and, with respect to the consolidated corporation in case of consolidation, all the statements required to be set forth in the articles of incorporation for corporations organized under this Code; and 4. Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable. (n) Sec. 77. Stockholder's or member's approval. - Upon approval by majority vote of each of the board of directors or trustees of the constituent corporations of the plan of merger or consolidation, the same shall be submitted for approval by the stockholders or members of each of such corporations at separate corporate meetings duly called for the purpose. Notice of such meetings shall be given to all stockholders or members of

the respective corporations, at least two (2) weeks prior to the date of the meeting, either personally or by registered mail. Said notice shall state the purpose of the meeting and shall include a copy or a summary of the plan of merger or consolidation. The affirmative vote of stockholders representing at least two-thirds (2/3) of the outstanding capital stock of each corporation in the case of stock corporations or at least two-thirds (2/3) of the members in the case of non-stock corporations shall be necessary for the approval of such plan. Any dissenting stockholder in stock corporations may exercise his appraisal right in accordance with the Code: Provided, That if after the approval by the stockholders of such plan, the board of directors decides to abandon the plan, the appraisal right shall be extinguished. Any amendment to the plan of merger or consolidation may be made, provided such amendment is approved by majority vote of the respective boards of directors or trustees of all the constituent corporations and ratified by the affirmative vote of stockholders representing at least twothirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members of each of the constituent corporations. Such plan, together with any amendment, shall be considered as the agreement of merger or consolidation. (n) Sec. 78. Articles of merger or consolidation. - After the approval by the stockholders or members as required by the preceding section, articles of merger or articles of consolidation shall be executed by each of the constituent corporations, to be signed by the president or vice-president and certified by the secretary or assistant secretary of each corporation setting forth: 1. The plan of the merger or the plan of consolidation; 2. As to stock corporations, the number of shares outstanding, or in the case of non-stock corporations, the number of members; and 3. As to each corporation, the number of shares or members voting for and against such plan, respectively. (n) Sec. 79. Effectivity of merger or consolidation. - The articles of merger or of consolidation, signed and certified as herein above required, shall be submitted to the Securities and Exchange Commission in quadruplicate for its approval: Provided, That in the case of merger or consolidation of banks or banking institutions, building and loan associations, trust companies,

insurance companies, public utilities, educational institutions and other special corporations governed by special laws, the favorable recommendation of the appropriate government agency shall first be obtained. If the Commission is satisfied that the merger or consolidation of the corporations concerned is not inconsistent with the provisions of this Code and existing laws, it shall issue a certificate of merger or of consolidation, at which time the merger or consolidation shall be effective. If, upon investigation, the Securities and Exchange Commission has reason to believe that the proposed merger or consolidation is contrary to or inconsistent with the provisions of this Code or existing laws, it shall set a hearing to give the corporations concerned the opportunity to be heard. Written notice of the date, time and place of hearing shall be given to each constituent corporation at least two (2) weeks before said hearing. The Commission shall thereafter proceed as provided in this Code. (n) Sec. 80. Effects or merger or consolidation. - The merger or consolidation shall have the following effects: 1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merger; and, in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation; 2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation; 3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers and shall be subject to all the duties and liabilities of a corporation organized under this Code; 4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account, including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation without further act or deed; and 5. The surviving or consolidated corporation shall be responsible and liable for all the liabilities and obligations of each of the constituent corporations in the same manner as if such surviving or consolidated corporation had

itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or against any of such constituent corporations may be prosecuted by or against the surviving or consolidated corporation. The rights of creditors or liens upon the property of any of such constituent corporations shall not be impaired by such merger or consolidation. (n) TITLE X APPRAISAL RIGHT Sec. 81. Instances of appraisal right. - Any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares in the following instances: 1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence; 2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Code; and 3. In case of merger or consolidation. (n) Sec. 82. How right is exercised. - The appraisal right may be exercised by any stockholder who shall have voted against the proposed corporate action, by making a written demand on the corporation within thirty (30) days after the date on which the vote was taken for payment of the fair value of his shares: Provided, That failure to make the demand within such period shall be deemed a waiver of the appraisal right. If the proposed corporate action is implemented or affected, the corporation shall pay to such stockholder, upon surrender of the certificate or certificates of stock representing his shares, the fair value thereof as of the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate action. If within a period of sixty (60) days from the date the corporate action was approved by the stockholders, the withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it shall be determined and appraised by three (3) disinterested persons, one of whom shall be named by the stockholder, another by the corporation, and the third by the two thus chosen. The findings of the majority of the appraisers

shall be final, and their award shall be paid by the corporation within thirty (30) days after such award is made: Provided, That no payment shall be made to any dissenting stockholder unless the corporation has unrestricted retained earnings in its books to cover such payment: and Provided, further, That upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith transfer his shares to the corporation. (n) Sec. 83. Effect of demand and termination of right. - From the time of demand for payment of the fair value of a stockholder's shares until either the abandonment of the corporate action involved or the purchase of the said shares by the corporation, all rights accruing to such shares, including voting and dividend rights, shall be suspended in accordance with the provisions of this Code, except the right of such stockholder to receive payment of the fair value thereof: Provided, That if the dissenting stockholder is not paid the value of his shares within 30 days after the award, his voting and dividend rights shall immediately be restored. (n) Sec. 84. When right to payment ceases. - No demand for payment under this Title may be withdrawn unless the corporation consents thereto. If, however, such demand for payment is withdrawn with the consent of the corporation, or if the proposed corporate action is abandoned or rescinded by the corporation or disapproved by the Securities and Exchange Commission where such approval is necessary, or if the Securities and Exchange Commission determines that such stockholder is not entitled to the appraisal right, then the right of said stockholder to be paid the fair value of his shares shall cease, his status as a stockholder shall thereupon be restored, and all dividend distributions which would have accrued on his shares shall be paid to him. (n) Sec. 85. Who bears costs of appraisal. - The costs and expenses of appraisal shall be borne by the corporation, unless the fair value ascertained by the appraisers is approximately the same as the price which the corporation may have offered to pay the stockholder, in which case they shall be borne by the latter. In the case of an action to recover such fair value, all costs and expenses shall be assessed against the corporation, unless the refusal of the stockholder to receive payment was unjustified. (n) Sec. 86. Notation on certificates; rights of transferee. - Within ten (10) days after demanding payment for his shares, a dissenting stockholder shall

submit the certificates of stock representing his shares to the corporation for notation thereon that such shares are dissenting shares. His failure to do so shall, at the option of the corporation, terminate his rights under this Title. If shares represented by the certificates bearing such notation are transferred, and the certificates consequently canceled, the rights of the transferor as a dissenting stockholder under this Title shall cease and the transferee shall have all the rights of a regular stockholder; and all dividend distributions which would have accrued on such shares shall be paid to the transferee. (n) TITLE XI NON-STOCK CORPORATIONS Sec. 87. Definition. - For the purposes of this Code, a non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees, or officers, subject to the provisions of this Code on dissolution: Provided, That any profit which a non-stock corporation may obtain as an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized, subject to the provisions of this Title. The provisions governing stock corporation, when pertinent, shall be applicable to non-stock corporations, except as may be covered by specific provisions of this Title. (n) Sec. 88. Purposes. - Non-stock corporations may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes, like trade, industry, agricultural and like chambers, or any combination thereof, subject to the special provisions of this Title governing particular classes of non-stock corporations. (n) Chapter I - MEMBERS Sec. 89. Right to vote. - The right of the members of any class or classes to vote may be limited, broadened or denied to the extent specified in the articles of incorporation or the by-laws. Unless so limited, broadened or denied, each member, regardless of class, shall be entitled to one vote. Unless otherwise provided in the articles of incorporation or the by-laws, a member may vote by proxy in accordance with the provisions of this Code. (n)

Voting by mail or other similar means by members of non-stock corporations may be authorized by the by-laws of non-stock corporations with the approval of, and under such conditions which may be prescribed by, the Securities and Exchange Commission. Sec. 90. Non-transferability of membership. - Membership in a non-stock corporation and all rights arising therefrom are personal and nontransferable, unless the articles of incorporation or the by-laws otherwise provide. (n) Sec. 91. Termination of membership. - Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the by-laws. Termination of membership shall have the effect of extinguishing all rights of a member in the corporation or in its property, unless otherwise provided in the articles of incorporation or the by-laws. (n) Chapter II - TRUSTEES AND OFFICERS Sec. 92. Election and term of trustees. - Unless otherwise provided in the articles of incorporation or the by-laws, the board of trustees of non-stock corporations, which may be more than fifteen (15) in number as may be fixed in their articles of incorporation or by-laws, shall, as soon as organized, so classify themselves that the term of office of one-third (1/3) of their number shall expire every year; and subsequent elections of trustees comprising one-third (1/3) of the board of trustees shall be held annually and trustees so elected shall have a term of three (3) years. Trustees thereafter elected to fill vacancies occurring before the expiration of a particular term shall hold office only for the unexpired period. No person shall be elected as trustee unless he is a member of the corporation. Unless otherwise provided in the articles of incorporation or the by-laws, officers of a non-stock corporation may be directly elected by the members. (n) Sec. 93. Place of meetings. - The by-laws may provide that the members of a non-stock corporation may hold their regular or special meetings at any place even outside the place where the principal office of the corporation is located: Provided, That proper notice is sent to all members indicating the date, time and place of the meeting: and Provided, further, That the place of meeting shall be within the Philippines. (n)

Chapter III - DISTRIBUTION OF ASSETS IN NON-STOCK CORPORATIONS Sec. 94. Rules of distribution. - In case dissolution of a non-stock corporation in accordance with the provisions of this Code, its assets shall be applied and distributed as follows: 1. All liabilities and obligations of the corporation shall be paid, satisfied and discharged, or adequate provision shall be made therefore; 2. Assets held by the corporation upon a condition requiring return, transfer or conveyance, and which condition occurs by reason of the dissolution, shall be returned, transferred or conveyed in accordance with such requirements; 3. Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution, shall be transferred or conveyed to one or more corporations, societies or organizations engaged in activities in the Philippines substantially similar to those of the dissolving corporation according to a plan of distribution adopted pursuant to this Chapter; 4. Assets other than those mentioned in the preceding paragraphs, if any, shall be distributed in accordance with the provisions of the articles of incorporation or the by-laws, to the extent that the articles of incorporation or the by-laws, determine the distributive rights of members, or any class or classes of members, or provide for distribution; and 5. In any other case, assets may be distributed to such persons, societies, organizations or corporations, whether or not organized for profit, as may be specified in a plan of distribution adopted pursuant to this Chapter. (n) Sec. 95. Plan of distribution of assets. - A plan providing for the distribution of assets, not inconsistent with the provisions of this Title, may be adopted by a non-stock corporation in the process of dissolution in the following manner: The board of trustees shall, by majority vote, adopt a resolution recommending a plan of distribution and directing the submission thereof to a vote at a regular or special meeting of members having voting rights. Written notice setting forth the proposed plan of distribution or a summary thereof and the date, time and place of such meeting shall be given to each member entitled to vote, within the time and in the manner provided in

this Code for the giving of notice of meetings to members. Such plan of distribution shall be adopted upon approval of at least two-thirds (2/3) of the members having voting rights present or represented by proxy at such meeting. (n) TITLE XII CLOSE CORPORATIONS Sec. 96. Definition and applicability of Title. - A close corporation, within the meaning of this Code, is one whose articles of incorporation provide that: (1) All the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than a specified number of persons, not exceeding twenty (20); (2) all the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class. Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the meaning of this Code. Any corporation may be incorporated as a close corporation, except mining or oil companies, stock exchanges, banks, insurance companies, public utilities, educational institutions and corporations declared to be vested with public interest in accordance with the provisions of this Code. The provisions of this Title shall primarily govern close corporations: Provided, That the provisions of other Titles of this Code shall apply suppletorily except insofar as this Title otherwise provides. Sec. 97. Articles of incorporation. - The articles of incorporation of a close corporation may provide: 1. For a classification of shares or rights and the qualifications for owning or holding the same and restrictions on their transfers as may be stated therein, subject to the provisions of the following section; 2. For a classification of directors into one or more classes, each of whom may be voted for and elected solely by a particular class of stock; and 3. For a greater quorum or voting requirements in meetings of stockholders or directors than those provided in this Code.

The articles of incorporation of a close corporation may provide that the business of the corporation shall be managed by the stockholders of the corporation rather than by a board of directors. So long as this provision continues in effect: 1. No meeting of stockholders need be called to elect directors; 2. Unless the context clearly requires otherwise, the stockholders of the corporation shall be deemed to be directors for the purpose of applying the provisions of this Code; and 3. The stockholders of the corporation shall be subject to all liabilities of directors. The articles of incorporation may likewise provide that all officers or employees or that specified officers or employees shall be elected or appointed by the stockholders, instead of by the board of directors. Sec. 98. Validity of restrictions on transfer of shares. - Restrictions on the right to transfer shares must appear in the articles of incorporation and in the by-laws as well as in the certificate of stock; otherwise, the same shall not be binding on any purchaser thereof in good faith. Said restrictions shall not be more onerous than granting the existing stockholders or the corporation the option to purchase the shares of the transferring stockholder with such reasonable terms, conditions or period stated therein. If upon the expiration of said period, the existing stockholders or the corporation fails to exercise the option to purchase, the transferring stockholder may sell his shares to any third person. Sec. 99. Effects of issuance or transfer of stock in breach of qualifying conditions. 1. If stock of a close corporation is issued or transferred to any person who is not entitled under any provision of the articles of incorporation to be a holder of record of its stock, and if the certificate for such stock conspicuously shows the qualifications of the persons entitled to be holders of record thereof, such person is conclusively presumed to have notice of the fact of his ineligibility to be a stockholder. 2. If the articles of incorporation of a close corporation states the number of persons, not exceeding twenty (20), who are entitled to be holders of record of its stock, and if the certificate for such stock conspicuously states such number, and if the issuance or transfer of stock to any person would cause the stock to be held by more than such number of persons, the

person to whom such stock is issued or transferred is conclusively presumed to have notice of this fact. 3. If a stock certificate of any close corporation conspicuously shows a restriction on transfer of stock of the corporation, the transferee of the stock is conclusively presumed to have notice of the fact that he has acquired stock in violation of the restriction, if such acquisition violates the restriction. 4. Whenever any person to whom stock of a close corporation has been issued or transferred has, or is conclusively presumed under this section to have, notice either (a) that he is a person not eligible to be a holder of stock of the corporation, or (b) that transfer of stock to him would cause the stock of the corporation to be held by more than the number of persons permitted by its articles of incorporation to hold stock of the corporation, or (c) that the transfer of stock is in violation of a restriction on transfer of stock, the corporation may, at its option, refuse to register the transfer of stock in the name of the transferee. 5. The provisions of subsection (4) shall not applicable if the transfer of stock, though contrary to subsections (1), (2) of (3), has been consented to by all the stockholders of the close corporation, or if the close corporation has amended its articles of incorporation in accordance with this Title. 6. The term "transfer", as used in this section, is not limited to a transfer for value. 7. The provisions of this section shall not impair any right which the transferee may have to rescind the transfer or to recover under any applicable warranty, express or implied. Sec. 100. Agreements by stockholders. 1. Agreements by and among stockholders executed before the formation and organization of a close corporation, signed by all stockholders, shall survive the incorporation of such corporation and shall continue to be valid and binding between and among such stockholders, if such be their intent, to the extent that such agreements are not inconsistent with the articles of incorporation, irrespective of where the provisions of such agreements are contained, except those required by this Title to be embodied in said articles of incorporation. 2. An agreement between two or more stockholders, if in writing and signed by the parties thereto, may provide that in exercising any voting

rights, the shares held by them shall be voted as therein provided, or as they may agree, or as determined in accordance with a procedure agreed upon by them. 3. No provision in any written agreement signed by the stockholders, relating to any phase of the corporate affairs, shall be invalidated as between the parties on the ground that its effect is to make them partners among themselves. 4. A written agreement among some or all of the stockholders in a close corporation shall not be invalidated on the ground that it so relates to the conduct of the business and affairs of the corporation as to restrict or interfere with the discretion or powers of the board of directors: Provided, That such agreement shall impose on the stockholders who are parties thereto the liabilities for managerial acts imposed by this Code on directors. 5. To the extent that the stockholders are actively engaged in the management or operation of the business and affairs of a close corporation, the stockholders shall be held to strict fiduciary duties to each other and among themselves. Said stockholders shall be personally liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance. Sec. 101. When board meeting is unnecessary or improperly held. - Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if: 1. Before or after such action is taken, written consent thereto is signed by all the directors; or 2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or 3. The directors are accustomed to take informal action with the express or implied acquiescence of all the stockholders; or 4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing. If a director's meeting is held without proper call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof. Sec. 102. Pre-emptive right in close corporations. - The pre-emptive right

of stockholders in close corporations shall extend to all stock to be issued, including reissuance of treasury shares, whether for money, property or personal services, or in payment of corporate debts, unless the articles of incorporation provide otherwise. Sec. 103. Amendment of articles of incorporation. - Any amendment to the articles of incorporation which seeks to delete or remove any provision required by this Title to be contained in the articles of incorporation or to reduce a quorum or voting requirement stated in said articles of incorporation shall not be valid or effective unless approved by the affirmative vote of at least two-thirds (2/3) of the outstanding capital stock, whether with or without voting rights, or of such greater proportion of shares as may be specifically provided in the articles of incorporation for amending, deleting or removing any of the aforesaid provisions, at a meeting duly called for the purpose. Sec. 104. Deadlocks. - Notwithstanding any contrary provision in the articles of incorporation or by-laws or agreement of stockholders of a close corporation, if the directors or stockholders are so divided respecting the management of the corporation's business and affairs that the votes required for any corporate action cannot be obtained, with the consequence that the business and affairs of the corporation can no longer be conducted to the advantage of the stockholders generally, the Securities and Exchange Commission, upon written petition by any stockholder, shall have the power to arbitrate the dispute. In the exercise of such power, the Commission shall have authority to make such order as it deems appropriate, including an order: (1) canceling or altering any provision contained in the articles of incorporation, by-laws, or any stockholder's agreement; (2) canceling, altering or enjoining any resolution or act of the corporation or its board of directors, stockholders, or officers; (3) directing or prohibiting any act of the corporation or its board of directors, stockholders, officers, or other persons party to the action; (4) requiring the purchase at their fair value of shares of any stockholder, either by the corporation regardless of the availability of unrestricted retained earnings in its books, or by the other stockholders; (5) appointing a provisional director; (6) dissolving the corporation; or (7) granting such other relief as the circumstances may warrant. A provisional director shall be an impartial person who is neither a stockholder nor a creditor of the corporation or of any subsidiary or affiliate

of the corporation, and whose further qualifications, if any, may be determined by the Commission. A provisional director is not a receiver of the corporation and does not have the title and powers of a custodian or receiver. A provisional director shall have all the rights and powers of a duly elected director of the corporation, including the right to notice of and to vote at meetings of directors, until such time as he shall be removed by order of the Commission or by all the stockholders. His compensation shall be determined by agreement between him and the corporation subject to approval of the Commission, which may fix his compensation in the absence of agreement or in the event of disagreement between the provisional director and the corporation. Sec. 105. Withdrawal of stockholder or dissolution of corporation. - In addition and without prejudice to other rights and remedies available to a stockholder under this Title, any stockholder of a close corporation may, for any reason, compel the said corporation to purchase his shares at their fair value, which shall not be less than their par or issued value, when the corporation has sufficient assets in its books to cover its debts and liabilities exclusive of capital stock: Provided, That any stockholder of a close corporation may, by written petition to the Securities and Exchange Commission, compel the dissolution of such corporation whenever any of acts of the directors, officers or those in control of the corporation is illegal, or fraudulent, or dishonest, or oppressive or unfairly prejudicial to the corporation or any stockholder, or whenever corporate assets are being misapplied or wasted.

TITLE XIII SPECIAL CORPORATIONS Chapter I - Educational Corporations Sec. 106. Incorporation. - Educational corporations shall be governed by special laws and by the general provisions of this Code. (n) Sec. 107. Pre-requisites to incorporation. - Except upon favorable recommendation of the Ministry of Education and Culture, the Securities

and Exchange Commission shall not accept or approve the articles of incorporation and by-laws of any educational institution. (168a) Sec. 108. Board of trustees. - Trustees of educational institutions organized as non-stock corporations shall not be less than five (5) nor more than fifteen (15): Provided, however, That the number of trustees shall be in multiples of five (5). Unless otherwise provided in the articles of incorporation on the by-laws, the board of trustees of incorporated schools, colleges, or other institutions of learning shall, as soon as organized, so classify themselves that the term of office of one-fifth (1/5) of their number shall expire every year. Trustees thereafter elected to fill vacancies, occurring before the expiration of a particular term, shall hold office only for the unexpired period. Trustees elected thereafter to fill vacancies caused by expiration of term shall hold office for five (5) years. A majority of the trustees shall constitute a quorum for the transaction of business. The powers and authority of trustees shall be defined in the by-laws. For institutions organized as stock corporations, the number and term of directors shall be governed by the provisions on stock corporations. (169a) Chapter II - RELIGIOUS CORPORATIONS Sec. 109. Classes of religious corporations. - Religious corporations may be incorporated by one or more persons. Such corporations may be classified into corporations sole and religious societies. Religious corporations shall be governed by this Chapter and by the general provisions on non-stock corporations insofar as they may be applicable. (n) Sec. 110. Corporation sole. - For the purpose of administering and managing, as trustee, the affairs, property and temporalities of any religious denomination, sect or church, a corporation sole may be formed by the chief archbishop, bishop, priest, minister, rabbi or other presiding elder of such religious denomination, sect or church. (154a) Sec. 111. Articles of incorporation. - In order to become a corporation sole, the chief archbishop, bishop, priest, minister, rabbi or presiding elder of any religious denomination, sect or church must file with the Securities and Exchange Commission articles of incorporation setting forth the following: 1. That he is the chief archbishop, bishop, priest, minister, rabbi or presiding elder of his religious denomination, sect or church and that he

desires to become a corporation sole; 2. That the rules, regulations and discipline of his religious denomination, sect or church are not inconsistent with his becoming a corporation sole and do not forbid it; 3. That as such chief archbishop, bishop, priest, minister, rabbi or presiding elder, he is charged with the administration of the temporalities and the management of the affairs, estate and properties of his religious denomination, sect or church within his territorial jurisdiction, describing such territorial jurisdiction; 4. The manner in which any vacancy occurring in the office of chief archbishop, bishop, priest, minister, rabbi of presiding elder is required to be filled, according to the rules, regulations or discipline of the religious denomination, sect or church to which he belongs; and 5. The place where the principal office of the corporation sole is to be established and located, which place must be within the Philippines. The articles of incorporation may include any other provision not contrary to law for the regulation of the affairs of the corporation. (n) Sec. 112. Submission of the articles of incorporation. - The articles of incorporation must be verified, before filing, by affidavit or affirmation of the chief archbishop, bishop, priest, minister, rabbi or presiding elder, as the case may be, and accompanied by a copy of the commission, certificate of election or letter of appointment of such chief archbishop, bishop, priest, minister, rabbi or presiding elder, duly certified to be correct by any notary public. From and after the filing with the Securities and Exchange Commission of the said articles of incorporation, verified by affidavit or affirmation, and accompanied by the documents mentioned in the preceding paragraph, such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall become a corporation sole and all temporalities, estate and properties of the religious denomination, sect or church theretofore administered or managed by him as such chief archbishop, bishop, priest, minister, rabbi or presiding elder shall be held in trust by him as a corporation sole, for the use, purpose, behalf and sole benefit of his religious denomination, sect or church, including hospitals, schools, colleges, orphan asylums, parsonages and cemeteries thereof. (n) Sec. 113. Acquisition and alienation of property. - Any corporation sole

may purchase and hold real estate and personal property for its church, charitable, benevolent or educational purposes, and may receive bequests or gifts for such purposes. Such corporation may sell or mortgage real property held by it by obtaining an order for that purpose from the Court of First Instance of the province where the property is situated upon proof made to the satisfaction of the court that notice of the application for leave to sell or mortgage has been given by publication or otherwise in such manner and for such time as said court may have directed, and that it is to the interest of the corporation that leave to sell or mortgage should be granted. The application for leave to sell or mortgage must be made by petition, duly verified, by the chief archbishop, bishop, priest, minister, rabbi or presiding elder acting as corporation sole, and may be opposed by any member of the religious denomination, sect or church represented by the corporation sole: Provided, That in cases where the rules, regulations and discipline of the religious denomination, sect or church, religious society or order concerned represented by such corporation sole regulate the method of acquiring, holding, selling and mortgaging real estate and personal property, such rules, regulations and discipline shall control, and the intervention of the courts shall not be necessary. (159a) Sec. 114. Filling of vacancies. - The successors in office of any chief archbishop, bishop, priest, minister, rabbi or presiding elder in a corporation sole shall become the corporation sole on their accession to office and shall be permitted to transact business as such on the filing with the Securities and Exchange Commission of a copy of their commission, certificate of election, or letters of appointment, duly certified by any notary public. During any vacancy in the office of chief archbishop, bishop, priest, minister, rabbi or presiding elder of any religious denomination, sect or church incorporated as a corporation sole, the person or persons authorized and empowered by the rules, regulations or discipline of the religious denomination, sect or church represented by the corporation sole to administer the temporalities and manage the affairs, estate and properties of the corporation sole during the vacancy shall exercise all the powers and authority of the corporation sole during such vacancy. (158a) Sec. 115. Dissolution. - A corporation sole may be dissolved and its affairs settled voluntarily by submitting to the Securities and Exchange Commission a verified declaration of dissolution.

The declaration of dissolution shall set forth: 1. The name of the corporation; 2. The reason for dissolution and winding up; 3. The authorization for the dissolution of the corporation by the particular religious denomination, sect or church; 4. The names and addresses of the persons who are to supervise the winding up of the affairs of the corporation. Upon approval of such declaration of dissolution by the Securities and Exchange Commission, the corporation shall cease to carry on its operations except for the purpose of winding up its affairs. (n) Sec. 116. Religious societies. - Any religious society or religious order, or any diocese, synod, or district organization of any religious denomination, sect or church, unless forbidden by the constitution, rules, regulations, or discipline of the religious denomination, sect or church of which it is a part, or by competent authority, may, upon written consent and/or by an affirmative vote at a meeting called for the purpose of at least two-thirds (2/3) of its membership, incorporate for the administration of its temporalities or for the management of its affairs, properties and estate by filing with the Securities and Exchange Commission, articles of incorporation verified by the affidavit of the presiding elder, secretary, or clerk or other member of such religious society or religious order, or diocese, synod, or district organization of the religious denomination, sect or church, setting forth the following: 1. That the religious society or religious order, or diocese, synod, or district organization is a religious organization of a religious denomination, sect or church; 2. That at least two-thirds (2/3) of its membership have given their written consent or have voted to incorporate, at a duly convened meeting of the body; 3. That the incorporation of the religious society or religious order, or diocese, synod, or district organization desiring to incorporate is not forbidden by competent authority or by the constitution, rules, regulations or discipline of the religious denomination, sect, or church of which it forms a part; 4. That the religious society or religious order, or diocese, synod, or district

organization desires to incorporate for the administration of its affairs, properties and estate; 5. The place where the principal office of the corporation is to be established and located, which place must be within the Philippines; and 6. The names, nationalities, and residences of the trustees elected by the religious society or religious order, or the diocese, synod, or district organization to serve for the first year or such other period as may be prescribed by the laws of the religious society or religious order, or of the diocese, synod, or district organization, the board of trustees to be not less than five (5) nor more than fifteen (15). (160a) TITLE XIV DISSOLUTION Sec. 117. Methods of dissolution. - A corporation formed or organized under the provisions of this Code may be dissolved voluntarily or involuntarily. (n) Sec. 118. Voluntary dissolution where no creditors are affected. - If dissolution of a corporation does not prejudice the rights of any creditor having a claim against it, the dissolution may be effected by majority vote of the board of directors or trustees, and by a resolution duly adopted by the affirmative vote of the stockholders owning at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members of a meeting to be held upon call of the directors or trustees after publication of the notice of time, place and object of the meeting for three (3) consecutive weeks in a newspaper published in the place where the principal office of said corporation is located; and if no newspaper is published in such place, then in a newspaper of general circulation in the Philippines, after sending such notice to each stockholder or member either by registered mail or by personal delivery at least thirty (30) days prior to said meeting. A copy of the resolution authorizing the dissolution shall be certified by a majority of the board of directors or trustees and countersigned by the secretary of the corporation. The Securities and Exchange Commission shall thereupon issue the certificate of dissolution. (62a) Sec. 119. Voluntary dissolution where creditors are affected. - Where the dissolution of a corporation may prejudice the rights of any creditor, the petition for dissolution shall be filed with the Securities and Exchange

Commission. The petition shall be signed by a majority of its board of directors or trustees or other officers having the management of its affairs, verified by its president or secretary or one of its directors or trustees, and shall set forth all claims and demands against it, and that its dissolution was resolved upon by the affirmative vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or by at least twothirds (2/3) of the members at a meeting of its stockholders or members called for that purpose. If the petition is sufficient in form and substance, the Commission shall, by an order reciting the purpose of the petition, fix a date on or before which objections thereto may be filed by any person, which date shall not be less than thirty (30) days nor more than sixty (60) days after the entry of the order. Before such date, a copy of the order shall be published at least once a week for three (3) consecutive weeks in a newspaper of general circulation published in the municipality or city where the principal office of the corporation is situated, or if there be no such newspaper, then in a newspaper of general circulation in the Philippines, and a similar copy shall be posted for three (3) consecutive weeks in three (3) public places in such municipality or city. Upon five (5) day's notice, given after the date on which the right to file objections as fixed in the order has expired, the Commission shall proceed to hear the petition and try any issue made by the objections filed; and if no such objection is sufficient, and the material allegations of the petition are true, it shall render judgment dissolving the corporation and directing such disposition of its assets as justice requires, and may appoint a receiver to collect such assets and pay the debts of the corporation. (Rule 104, RCa) Sec. 120. Dissolution by shortening corporate term. - A voluntary dissolution may be effected by amending the articles of incorporation to shorten the corporate term pursuant to the provisions of this Code. A copy of the amended articles of incorporation shall be submitted to the Securities and Exchange Commission in accordance with this Code. Upon approval of the amended articles of incorporation of the expiration of the shortened term, as the case may be, the corporation shall be deemed dissolved without any further proceedings, subject to the provisions of this Code on liquidation. (n) Sec. 121. Involuntary dissolution. - A corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and

after proper notice and hearing on the grounds provided by existing laws, rules and regulations. (n) Sec. 122. Corporate liquidation. - Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. At any time during said three (3) years, the corporation is authorized and empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest. Upon the winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated to the city or municipality where such assets are located. Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities. (77a, 89a, 16a) TITLE XV FOREIGN CORPORATIONS Sec. 123. Definition and rights of foreign corporations. - For the purposes of this Code, a foreign corporation is one formed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state. It shall have the right to transact business in the Philippines after it shall have obtained a license to transact business in this country in accordance with this Code and a certificate of authority from the appropriate

government agency. (n) Sec. 124. Application to existing foreign corporations. - Every foreign corporation which on the date of the effectivity of this Code is authorized to do business in the Philippines under a license therefore issued to it, shall continue to have such authority under the terms and condition of its license, subject to the provisions of this Code and other special laws. (n) Sec. 125. Application for a license. - A foreign corporation applying for a license to transact business in the Philippines shall submit to the Securities and Exchange Commission a copy of its articles of incorporation and bylaws, certified in accordance with law, and their translation to an official language of the Philippines, if necessary. The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following: 1. The date and term of incorporation; 2. The address, including the street number, of the principal office of the corporation in the country or state of incorporation; 3. The name and address of its resident agent authorized to accept summons and process in all legal proceedings and, pending the establishment of a local office, all notices affecting the corporation; 4. The place in the Philippines where the corporation intends to operate; 5. The specific purpose or purposes which the corporation intends to pursue in the transaction of its business in the Philippines: Provided, That said purpose or purposes are those specifically stated in the certificate of authority issued by the appropriate government agency; 6. The names and addresses of the present directors and officers of the corporation; 7. A statement of its authorized capital stock and the aggregate number of shares which the corporation has authority to issue, itemized by classes, par value of shares, shares without par value, and series, if any; 8. A statement of its outstanding capital stock and the aggregate number of shares which the corporation has issued, itemized by classes, par value of shares, shares without par value, and series, if any; 9. A statement of the amount actually paid in; and 10. Such additional information as may be necessary or appropriate in

order to enable the Securities and Exchange Commission to determine whether such corporation is entitled to a license to transact business in the Philippines, and to determine and assess the fees payable. Attached to the application for license shall be a duly executed certificate under oath by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact that the laws of the country or state of the applicant allow Filipino citizens and corporations to do business therein, and that the applicant is an existing corporation in good standing. If such certificate is in a foreign language, a translation thereof in English under oath of the translator shall be attached thereto. The application for a license to transact business in the Philippines shall likewise be accompanied by a statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Securities and Exchange Commission and other governmental agency in the proper cases that the applicant is solvent and in sound financial condition, and setting forth the assets and liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application. Foreign banking, financial and insurance corporations shall, in addition to the above requirements, comply with the provisions of existing laws applicable to them. In the case of all other foreign corporations, no application for license to transact business in the Philippines shall be accepted by the Securities and Exchange Commission without previous authority from the appropriate government agency, whenever required by law. (68a) Sec. 126. Issuance of a license. - If the Securities and Exchange Commission is satisfied that the applicant has complied with all the requirements of this Code and other special laws, rules and regulations, the Commission shall issue a license to the applicant to transact business in the Philippines for the purpose or purposes specified in such license. Upon issuance of the license, such foreign corporation may commence to transact business in the Philippines and continue to do so for as long as it retains its authority to act as a corporation under the laws of the country or state of its incorporation, unless such license is sooner surrendered, revoked, suspended or annulled in accordance with this Code or other special laws. Within sixty (60) days after the issuance of the license to transact business in the Philippines, the license, except foreign banking or insurance

corporation, shall deposit with the Securities and Exchange Commission for the benefit of present and future creditors of the licensee in the Philippines, securities satisfactory to the Securities and Exchange Commission, consisting of bonds or other evidence of indebtedness of the Government of the Philippines, its political subdivisions and instrumentalities, or of government-owned or controlled corporations and entities, shares of stock in "registered enterprises" as this term is defined in Republic Act No. 5186, shares of stock in domestic corporations registered in the stock exchange, or shares of stock in domestic insurance companies and banks, or any combination of these kinds of securities, with an actual market value of at least one hundred thousand (P100,000.) pesos; Provided, however, That within six (6) months after each fiscal year of the licensee, the Securities and Exchange Commission shall require the licensee to deposit additional securities equivalent in actual market value to two (2%) percent of the amount by which the licensee's gross income for that fiscal year exceeds five million (P5,000,000.00) pesos. The Securities and Exchange Commission shall also require deposit of additional securities if the actual market value of the securities on deposit has decreased by at least ten (10%) percent of their actual market value at the time they were deposited. The Securities and Exchange Commission may at its discretion release part of the additional securities deposited with it if the gross income of the licensee has decreased, or if the actual market value of the total securities on deposit has increased, by more than ten (10%) percent of the actual market value of the securities at the time they were deposited. The Securities and Exchange Commission may, from time to time, allow the licensee to substitute other securities for those already on deposit as long as the licensee is solvent. Such licensee shall be entitled to collect the interest or dividends on the securities deposited. In the event the licensee ceases to do business in the Philippines, the securities deposited as aforesaid shall be returned, upon the licensee's application therefor and upon proof to the satisfaction of the Securities and Exchange Commission that the licensee has no liability to Philippine residents, including the Government of the Republic of the Philippines. (n) Sec. 127. Who may be a resident agent. - A resident agent may be either an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines: Provided, That in the case of an individual, he must be of good moral character and of sound financial standing. (n)

Sec. 128. Resident agent; service of process. - The Securities and Exchange Commission shall require as a condition precedent to the issuance of the license to transact business in the Philippines by any foreign corporation that such corporation file with the Securities and Exchange Commission a written power of attorney designating some person who must be a resident of the Philippines, on whom any summons and other legal processes may be served in all actions or other legal proceedings against such corporation, and consenting that service upon such resident agent shall be admitted and held as valid as if served upon the duly authorized officers of the foreign corporation at its home office. Any such foreign corporation shall likewise execute and file with the Securities and Exchange Commission an agreement or stipulation, executed by the proper authorities of said corporation, in form and substance as follows: "The (name of foreign corporation) does hereby stipulate and agree, in consideration of its being granted by the Securities and Exchange Commission a license to transact business in the Philippines, that if at any time said corporation shall cease to transact business in the Philippines, or shall be without any resident agent in the Philippines on whom any summons or other legal processes may be served, then in any action or proceeding arising out of any business or transaction which occurred in the Philippines, service of any summons or other legal process may be made upon the Securities and Exchange Commission and that such service shall have the same force and effect as if made upon the duly-authorized officers of the corporation at its home office." Whenever such service of summons or other process shall be made upon the Securities and Exchange Commission, the Commission shall, within ten (10) days thereafter, transmit by mail a copy of such summons or other legal process to the corporation at its home or principal office. The sending of such copy by the Commission shall be necessary part of and shall complete such service. All expenses incurred by the Commission for such service shall be paid in advance by the party at whose instance the service is made. In case of a change of address of the resident agent, it shall be his or its duty to immediately notify in writing the Securities and Exchange Commission of the new address. (72a; and n) Sec. 129. Law applicable. - Any foreign corporation lawfully doing business in the Philippines shall be bound by all laws, rules and regulations

applicable to domestic corporations of the same class, except such only as provide for the creation, formation, organization or dissolution of corporations or those which fix the relations, liabilities, responsibilities, or duties of stockholders, members, or officers of corporations to each other or to the corporation. (73a) Sec. 130. Amendments to articles of incorporation or by-laws of foreign corporations. - Whenever the articles of incorporation or by-laws of a foreign corporation authorized to transact business in the Philippines are amended, such foreign corporation shall, within sixty (60) days after the amendment becomes effective, file with the Securities and Exchange Commission, and in the proper cases with the appropriate government agency, a duly authenticated copy of the articles of incorporation or bylaws, as amended, indicating clearly in capital letters or by underscoring the change or changes made, duly certified by the authorized official or officials of the country or state of incorporation. The filing thereof shall not of itself enlarge or alter the purpose or purposes for which such corporation is authorized to transact business in the Philippines. (n) Sec. 131. Amended license. - A foreign corporation authorized to transact business in the Philippines shall obtain an amended license in the event it changes its corporate name, or desires to pursue in the Philippines other or additional purposes, by submitting an application therefor to the Securities and Exchange Commission, favorably endorsed by the appropriate government agency in the proper cases. (n) Sec. 132. Merger or consolidation involving a foreign corporation licensed in the Philippines. - One or more foreign corporations authorized to transact business in the Philippines may merge or consolidate with any domestic corporation or corporations if such is permitted under Philippine laws and by the law of its incorporation: Provided, That the requirements on merger or consolidation as provided in this Code are followed. Whenever a foreign corporation authorized to transact business in the Philippines shall be a party to a merger or consolidation in its home country or state as permitted by the law of its incorporation, such foreign corporation shall, within sixty (60) days after such merger or consolidation becomes effective, file with the Securities and Exchange Commission, and in proper cases with the appropriate government agency, a copy of the articles of merger or consolidation duly authenticated by the proper official or officials of the country or state under the laws of which merger or

consolidation was effected: Provided, however, That if the absorbed corporation is the foreign corporation doing business in the Philippines, the latter shall at the same time file a petition for withdrawal of it license in accordance with this Title. (n) Sec. 133. Doing business without a license. - No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. (69a) Sec. 134. Revocation of license. - Without prejudice to other grounds provided by special laws, the license of a foreign corporation to transact business in the Philippines may be revoked or suspended by the Securities and Exchange Commission upon any of the following grounds: 1. Failure to file its annual report or pay any fees as required by this Code; 2. Failure to appoint and maintain a resident agent in the Philippines as required by this Title; 3. Failure, after change of its resident agent or of his address, to submit to the Securities and Exchange Commission a statement of such change as required by this Title; 4. Failure to submit to the Securities and Exchange Commission an authenticated copy of any amendment to its articles of incorporation or bylaws or of any articles of merger or consolidation within the time prescribed by this Title; 5. A misrepresentation of any material matter in any application, report, affidavit or other document submitted by such corporation pursuant to this Title; 6. Failure to pay any and all taxes, imposts, assessments or penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions; 7. Transacting business in the Philippines outside of the purpose or purposes for which such corporation is authorized under its license; 8. Transacting business in the Philippines as agent of or acting for and in behalf of any foreign corporation or entity not duly licensed to do business

in the Philippines; or 9. Any other ground as would render it unfit to transact business in the Philippines. (n) Sec. 135. Issuance of certificate of revocation. - Upon the revocation of any such license to transact business in the Philippines, the Securities and Exchange Commission shall issue a corresponding certificate of revocation, furnishing a copy thereof to the appropriate government agency in the proper cases. The Securities and Exchange Commission shall also mail to the corporation at its registered office in the Philippines a notice of such revocation accompanied by a copy of the certificate of revocation. (n) Sec. 136. Withdrawal of foreign corporations. - Subject to existing laws and regulations, a foreign corporation licensed to transact business in the Philippines may be allowed to withdraw from the Philippines by filing a petition for withdrawal of license. No certificate of withdrawal shall be issued by the Securities and Exchange Commission unless all the following requirements are met; 1. All claims which have accrued in the Philippines have been paid, compromised or settled; 2. All taxes, imposts, assessments, and penalties, if any, lawfully due to the Philippine Government or any of its agencies or political subdivisions have been paid; and 3. The petition for withdrawal of license has been published once a week for three (3) consecutive weeks in a newspaper of general circulation in the Philippines. TITLE XVI MISCELLANEOUS PROVISIONS Sec. 137. Outstanding capital stock defined. - The term "outstanding capital stock", as used in this Code, means the total shares of stock issued under binding subscription agreements to subscribers or stockholders, whether or not fully or partially paid, except treasury shares. (n) Sec. 138. Designation of governing boards. - The provisions of specific provisions of this Code to the contrary notwithstanding, non-stock or special corporations may, through their articles of incorporation or their bylaws, designate their governing boards by any name other than as board of

trustees. (n) Sec. 139. Incorporation and other fees. - The Securities and Exchange Commission is hereby authorized to collect and receive fees as authorized by law or by rules and regulations promulgated by the Commission. (n) Sec. 140. Stock ownership in certain corporations. - Pursuant to the duties specified by Article XIV of the Constitution, the National Economic and Development Authority shall, from time to time, make a determination of whether the corporate vehicle has been used by any corporation or by business or industry to frustrate the provisions thereof or of applicable laws, and shall submit to the Batasang Pambansa, whenever deemed necessary, a report of its findings, including recommendations for their prevention or correction. Maximum limits may be set by the Batasang Pambansa for stockholdings in corporations declared by it to be vested with a public interest pursuant to the provisions of this section, belonging to individuals or groups of individuals related to each other by consanguinity or affinity or by close business interests, or whenever it is necessary to achieve national objectives, prevent illegal monopolies or combinations in restraint or trade, or to implement national economic policies declared in laws, rules and regulations designed to promote the general welfare and foster economic development. In recommending to the Batasang Pambansa corporations, business or industries to be declared vested with a public interest and in formulating proposals for limitations on stock ownership, the National Economic and Development Authority shall consider the type and nature of the industry, the size of the enterprise, the economies of scale, the geographic location, the extent of Filipino ownership, the labor intensity of the activity, the export potential, as well as other factors which are germane to the realization and promotion of business and industry. Sec. 141. Annual report or corporations. - Every corporation, domestic or foreign, lawfully doing business in the Philippines shall submit to the Securities and Exchange Commission an annual report of its operations, together with a financial statement of its assets and liabilities, certified by any independent certified public accountant in appropriate cases, covering the preceding fiscal year and such other requirements as the Securities and Exchange Commission may require. Such report shall be submitted within such period as may be prescribed by the Securities and Exchange

Commission. (n) Sec. 142. Confidential nature of examination results. - All interrogatories propounded by the Securities and Exchange Commission and the answers thereto, as well as the results of any examination made by the Commission or by any other official authorized by law to make an examination of the operations, books and records of any corporation, shall be kept strictly confidential, except insofar as the law may require the same to be made public or where such interrogatories, answers or results are necessary to be presented as evidence before any court. (n) Sec. 143. Rule-making power of the Securities and Exchange Commission. - The Securities and Exchange Commission shall have the power and authority to implement the provisions of this Code, and to promulgate rules and regulations reasonably necessary to enable it to perform its duties hereunder, particularly in the prevention of fraud and abuses on the part of the controlling stockholders, members, directors, trustees or officers. (n) Sec. 144. Violations of the Code. - Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of not less than one thousand (P1,000.00) pesos but not more than ten thousand (P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more than five (5) years, or both, in the discretion of the court. If the violation is committed by a corporation, the same may, after notice and hearing, be dissolved in appropriate proceedings before the Securities and Exchange Commission: Provided, That such dissolution shall not preclude the institution of appropriate action against the director, trustee or officer of the corporation responsible for said violation: Provided, further, That nothing in this section shall be construed to repeal the other causes for dissolution of a corporation provided in this Code. (190 1/2 a) Sec. 145. Amendment or repeal. - No right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation or by any subsequent amendment or repeal of this Code or of any part thereof. (n) Sec. 146. Repealing clause. - Except as expressly provided by this Code, all laws or parts thereof inconsistent with any provision of this Code shall be

deemed repealed. (n) Sec. 147. Separability of provisions. - Should any provision of this Code or any part thereof be declared invalid or unconstitutional, the other provisions, so far as they are separable, shall remain in force. (n) Sec. 148. Applicability to existing corporations. - All corporations lawfully existing and doing business in the Philippines on the date of the effectivity of this Code and heretofore authorized, licensed or registered by the Securities and Exchange Commission, shall be deemed to have been authorized, licensed or registered under the provisions of this Code, subject to the terms and conditions of its license, and shall be governed by the provisions hereof: Provided, That if any such corporation is affected by the new requirements of this Code, said corporation shall, unless otherwise herein provided, be given a period of not more than two (2) years from the effectivity of this Code within which to comply with the same. (n) Sec. 149. Effectivity. - This Code shall take effect immediately upon its approval. Approved: May 1, 1980 THE SECURITIES REGULATION CODE [REPUBLIC ACT NO. 8799] CHAPTER I TITLE AND DEFINITIONS Section 1. Title. - This shall be known as "The Securities Regulation Code" Section 2. Declaration of State Policy. The State shall establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprises, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market. To achieve these ends, this Securities Regulation Code is hereby enacted. Section 3. Definition of Terms. - 3.1. "Securities" are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character. It includes: (a) Shares of stocks, bonds, debentures, notes evidences of indebtedness, assetbacked securities; (b) Investment contracts, certificates of interest or participation in a profit sharing agreement, certifies of deposit for a future subscription; (c) Fractional undivided interests in oil, gas or other mineral rights; (d) Derivatives like option and warrants; (e) Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments (f) Proprietary or nonproprietary membership certificates in corporations; and (g) Other instruments as may in the future be determined by the Commission. 3.2. "Issuer" is the originator, maker, obligor, or creator of the security. 3.3. "Broker" is a person engaged in the business of buying and selling securities for the account of others. 3.4. "Dealer" means many person who buys sells securities for his/her own account in the ordinary course of business.

3.5. "Associated person of a broker or dealer" is an employee therefor whom, directly exercises control of supervisory authority, but does not include a salesman, or an agent or a person whose functions are solely clerical or ministerial. 3.6. "Clearing Agency" is any person who acts as intermediary in making deliveries upon payment effect settlement in securities transactions. 3.7. "Exchange" is an organized market place or facility that brings together buyers and sellers and executes trade of securities and/or commodities. 3.8. "Insider" means (a) the issuer; (b) a director or officer (or any person performing similar functions) of, or a person controlling the issuer; gives or gave him access to material information about the issuer or the security that is not generally available to the public; (d) A government employee, director, or officer of an exchange, clearing agency and/or self-regulatory organization who has access to material information about an issuer or a security that is not generally available to the public; or (e) a person who learns such information by a communication from any forgoing insiders. 3.9. "Pre-need plans" are contracts which provide for the performance of future services of or the payment of future monetary considerations at the time actual need, for which plan holders pay in cash or installment at stated prices, with or without interest or insurance coverage and includes life, pension, education, interment, and other plans which the Commission may from time to time approve. 3.10. "Promoter" is a person who, acting alone or with others, takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration therefor. 3.11. "Prospectus" is the document made by or an behalf of an issuer, underwriter or dealer to sell or offer securities for sale to the public through registration statement filed with the Commission. 3.12. "Registration statement" is the application for the registration of securities required to be filed with the Commission. 3.13. "Salesman" is a natural person, employed as such as an agent, by a dealer, issuer or broker to buy and sell securities. 3.14. "Uncertificated security" is a security evidenced by electronic or similar records. 3.15. "Underwriter" is a person who guarantees on a firm commitment and/or declared best effort basis the distribution and sale of securities of any kind by another company. CHAPTER II SECURITIES AND EXCHANGE COMMISSION

Section 4. Administrative Agency. 4.1. This Code shall be administered by the Security and Exchange Commission (hereinafter referred to as the "Commission") as a Collegial body, composed of a chairperson and (4) Commissioners, appointed by the President for a term of (7) seven years each and who shall serves as such until their successor shall have been appointed and qualified. A Commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his/her predecessor was appointed, shall serve only for the unexpired portion of their terms under Presidential Decree No. 902-A. Unless the context indicates otherwise, the term "Commissioner" includes the Chairperson. 4.2. The Commissioners must be natural-born citizens of the Philippines, at least forty (40) years of age for the Chairperson and at least thirty-five (35) years of age for the Commissioners, of good moral character, or unquestionable integrity, of known probity and patriotism, and with recognized competence in social and economic disciplines: Provided, That the majority of Commissioners, including the Chairperson, shall be members of the Philippine Bar. 4.3. The chairperson is chief executive officer of the Commission. The Chairperson shall execute and administer the policies, decisions, orders and resolutions approved by the Commission and shall have the general executive direction and supervision of the work and operation of the Commission and its members, bodies, boards, offices, personnel and all its administrative business. 4.4. The salary of the Chairperson and the Commissioners shall be fixed by the President of the Philippines based on the objective classification system, at a sum comparable to the members of the Monetary Board and commensurate importance and responsibilities attached to the position. 4.5. The Commission shall hold meetings at least once a week for the conduct of business or as often as may be necessary upon the call of the Chairperson or upon the request of (3) Commissioners. The notice of the meeting shall be given to all Commissioners and the presence of three (3) Commissioners shall constitute a quorum. In the absence of the Chairperson, the most senior Commissioner shall act as presiding officer of the meeting. 4.6. The Commission may, for purposes of efficiency, delegate any of its functions to any department of office of the Commission, an individual Commissioner or staff member of the Commission except its review or appellate authority and its power to adopt, alter and supplement any rule or regulation. The commission may review upon its own initiative or upon the petition of any interested party any action of any department or office, individual Commissioner, or staff member of the Commission.

Section 5. Powers and Functions of the Commission. 5.1. The commission shall act with transparency and shall have the powers and functions provided by this code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions: (a) Have jurisdiction and supervision over all corporations, partnership or associations who are the grantees of primary franchises and/or a license or a permit issued by the Government; (b) Formulate policies and recommendations on issues concerning the securities market, advise Congress and other government agencies on all aspect of the securities market and propose legislation and amendments thereto; (c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications; (d) Regulate, investigate or supervise the activities of persons to ensure compliance; (e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs; (f) Impose sanctions for the violation of laws and rules, regulations and orders, and issued pursuant thereto; (g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance on and supervise compliance with such rules, regulation and orders; (h) Enlist the aid and support of and/or deputized any and all enforcement agencies of the Government, civil or military as well as any private institution, corporation, firm, association or person in the implementation of its powers and function under its Code; (i) Issue cease and desist orders to prevent fraud or injury to the investing public; (j) Punish for the contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court; (k) Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its supervision; (l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax returns and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provisions of existing laws;

(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or associations, upon any of the grounds provided by law; and (n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws. 5.2. The Commissions jurisdiction over all cases enumerated under section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over the cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed. Section 6. Indemnification and Responsibilities of Commissioners. 6.1. The Commission shall indemnify each Commissioner and other officials of the Commission, including personnel performing supervision and examination functions for all cost and expenses reasonably incurred by such persons in connection with any civil or criminal actions, suits or proceedings to be liable for gross negligence or misconduct. In the event of settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Commission is advised by external counsel that the persons to be indemnified did not commit any gross negligence or misconduct. The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Commission in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Commissioner, officer or employee to repay the amount advanced should it ultimately be determined by the Commission that he/she is not entitled to be indemnified as provided in this subsection. 6.2. The Commissioners, officers and employees of the Commission who willfully violate this Code or who are guilty of negligence, abuse or acts of malfeasance or fail to exercise extraordinary diligence in the performance of their duties shall be held liable for any loss or injury suffered by the Commission or other institutions such as a result of such violation, negligence, abuse, or malfeasance, or failure to

exercise extraordinary diligence. Similar responsibility shall apply to the Commissioners, officers and employees of the Commission for (1) the disclosure of any information, discussion or resolution of the Commission of a confidential nature, or about the confidential operations of the Commission unless the disclosure is in connection with the performance of official functions with the Commission or prior authorization of the Commissioners; or (2) the use of such information for personal gain or to the detriment of the government, the Commission or third parties: Provided, however, That any data or information required to be submitted to the President and/or Congress or its appropriate committee, or to be published under the provisions of this Code shall not be considered confidential. Section 7. Reorganization. 7.1. To achieve the goals of this Code, consistent with the Civil Service laws, the Commission is hereby authorized to provide for its reorganization, to streamline its structure and operations, upgrade its human resource component and enable it to more efficiently and effectively perform its functions and exercise its power under this Code. 7.2. All positions of the Commissions shall be governed by a compensation and position classification system and qualification standards approved by the Commission based on comprehensive job analysis and audit of actual duties and personal responsibilities. The compensation plan shall be comparable with the prevailing compensation plan in the Bangko Sentral ng Pilipinas and other government financial institutions and shall be subject to periodic review by the Commission no more than once every two (2) years without prejudice to yearly merit review or increases based on productivity and efficiency. The Commission shall, therefore, be exempt from laws, rules, and regulations on compensation, position classification and qualifications standards. The Commission shall, however, endeavor to make its system conform as closely as possible with the principles under the Compensation and Position Classification Act of 1989 (Republic Act. 6758, as amended). CHAPTER III REGISTRATION OF SECURITIES Section 8. Requirement of Registration of Securities. 8.1. Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission. Prior to such sale, information on the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser. 8.2. The Commission may conditionally approve the registration statement under such terms as it may deem necessary.

8.3. The Commission may specify the terms and conditions under which any written communication, including any summary prospectus, shall be deemed not to constitute an offer for sale under this Section. 8.4. A record of the registration of securities shall be kept in Register Securities in which shall be recorded orders entered by the Commission with respect such securities. Such register and all documents or information with the respect to the securities registered therein shall be open to public inspection at reasonable hours on business days. 8.5. The Commission may audit the financial statements, assets and other information of firm applying for registration of its securities whenever it deems the same necessary to insure full disclosure or to protect the interest of the investors and the public in general. Section 9. Exempt Securities. 9.1. The requirement of registration under Subsection 8.1 shall not as a general rule apply to any of the following classes of securities: (a) Any security issued or guaranteed by the Government of the Philippines, or by any political subdivision or agency thereof, or by any person controlled or supervised by, and acting as an instrumentality of said Government. (b) Any security issued or guaranteed by the government of any country with which the Philippines maintains diplomatic relations, or by any state, province or political subdivision thereof on the basis of reciprocity: Provided, That the Commission may require compliance with the form and content for disclosures the Commission may prescribe. (c) Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body. (d) Any security or its derivatives the sale or transfer of which, by law, is under the supervision and regulation of the Office of the Insurance Commission, Housing and Land Use Rule Regulatory Board, or the Bureau of Internal Revenue. (e) Any security issued by a bank except its own shares of stock. 9.2. The Commission may, by rule or regulation after public hearing, add to the foregoing any class of securities if it finds that the enforcement of this Code with respect to such securities is not necessary in the public interest and for the protection of investors.

Section 10. Exempt Transactions. 10.1. The requirement of registration under Subsection 8.1 shall not apply to the sale of any security in any of the following transactions: (a) At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy. (b) By or for the account of a pledge holder, or mortgagee or any of a pledge lien holder selling of offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding the provision of this Code, to liquidate a bonafide debt, a security pledged in good faith as security for such debt. (c) An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner therefore, or by his representative for the owners account, such sale or offer for sale or offer for sale, subscription or delivery not being made in the course of repeated and successive transaction of a like character by such owner, or on his account by such representative and such owner or representative not being the underwriter of such security. (d) The distribution by a corporation actively engaged in the business authorized by its articles of incorporation, of securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus. (e) The sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock. (f) The issuance of bonds or notes secured by mortgage upon real estate or tangible personal property, when the entire mortgage together with all the bonds or notes secured thereby are sold to a single purchaser at a single sale. (g) The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security surrendered in exchange to make such conversion: Provided, That the security so surrendered has been registered under this Code or was, when sold, exempt from the provision of this Code, and that the security issued and delivered in exchange, if sold at the conversion price, would at the time of such conversion fall within the class of securities entitled to registration under this Code. Upon such conversion the par value of the security surrendered in such exchange shall be deemed the price at which the securities issued and delivered in such exchange are sold. (h) Brokers transaction, executed upon customers orders, on any registered Exchange or other trading market.

(i) Subscriptions for shares of the capitals stocks of a corporation prior to the incorporation thereof or in pursuance of an increase in its authorized capital stocks under the Corporation Code, when no expense is incurred, or no commission, compensation or remuneration is paid or given in connection with the sale or disposition of such securities, and only when the purpose for soliciting, giving or taking of such subscription is to comply with the requirements of such law as to the percentage of the capital stock of a corporation which should be subscribed before it can be registered and duly incorporated, or its authorized, capital increase. (j) The exchange of securities by the issuer with the existing security holders exclusively, where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange. (k) The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during any twelve-month period. (l) The sale of securities to any number of the following qualified buyers: (i) Bank; (ii) Registered investment house; (iii) Insurance company; (iv) Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or manage by a bank or other persons authorized by the Bangko Sentral to engage in trust functions; (v) Investment company or; (vi) Such other person as the Commission may rule by determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management. 10.2. The Commission may exempt other transactions, if it finds that the requirements of registration under this Code is not necessary in the public interest or for the protection of the investors such as by the reason of the small amount involved or the limited character of the public offering. 10.3. Any person applying for an exemption under this Section, shall file with the Commission a notice identifying the exemption relied upon on such form and at such time as the Commission by the rule may prescribe and with such notice shall pay to the Commission fee equivalent to one-tenth (1/10) of one percent (1%) of the maximum value aggregate price or issued value of the securities.

Section 11. Commodity Futures Contracts. - No person shall offer, sell or enter into commodity futures contracts except in accordance with the rules, regulations and orders the Commission may prescribe in the public interest. The Commission shall promulgate rules and regulations involving commodity futures contracts to protect investors to ensure the development of a fair and transparent commodities market. Section 12. Procedure of Registration Securities. - 12.1. All securities required to be registered under Subsection 8. I shall be registered through the filing by the issuer in the main office of the Commission, of a sworn registration statement with the respect to such securities, in such form and containing such information and document as the Commission prescribe. The registration statement shall include any prospectus required or permitted to be delivered under Subsections 8.2, 8.3, and 8.4. 12.2. In promulgating rules governing the content of any registration statement (including any prospectus made a part thereof or annex thereto), the Commission may require the registration statement to contain such information or documents as it may, by rule, prescribe. It may dispense with any such requirements, or may require additional information or documents, including written information from an expert, depending on the necessity thereof or their applicability to the class of securities sought to be registered. 12.3. The information required for the registration of any kind, and all securities, shall include, among others, the effect of the securities issue on ownership, on the mix of ownership, especially foreign and local ownership. 12.4. The registration statement shall be signed by the issuers executive officer, its principal operating officer, its principal financial officer, its comptroller, its principal accounting officer, its corporate secretary, or persons performing similar functions accompanied by a duly verified resolution of the board of directors of the issuer corporation. The written consent of the expert named as having certified any part of the registration statement or any document used in connection therewith shall also be filed. Where the registration statement shares to be sold by selling shareholders, a written certification by such selling shareholders as to the accuracy of any part of the registration statement contributed to by such selling shareholders shall be filed. 12.5. (a) Upon filing of the registration statement, the issuer shall pay to the Commission a fee of not more than one-tenth (1/10) of one per centum (1%) of the maximum aggregate price at which such securities are proposed to be offered. The Commission shall prescribe by the rule diminishing fees in inverse proportion the value of the aggregate price of the offering. (b) Notice of the filing of the registration statement shall be immediately published by the issuer, at its own expense, in two (2) newspapers of general circulation in the

Philippines, once a week for two (2) consecutive weeks, or in such other manner as the Commission by the rule shall prescribe, reciting that a registration statement for the sale of such securities has been filed, and that aforesaid registration statement, as well as the papers attached thereto are open to inspection at the Commission during business hours, and copies thereof, photostatic or otherwise, shall be furnished to interested parties at such reasonable charge as the Commission may prescribe. 12.6. Within forty-five (45) days after the date of filing of the registration statement, or by such later date to which the issuer has consented, the Commission shall declare the registration statement effective or rejected, unless the applicant is allowed to amend the registration statement as provided in Section 14 hereof. The Commission shall enter an order declaring the registration statement to be effective if it finds that the registration statement together with all the other papers and documents attached thereto, is on its face complete and that the requirements have been complied with. The Commission may impose such terms and conditions as may be necessary or appropriate for the protection of the investors. 12.7. Upon affectivity of the registration statement, the issuer shall state under oath in every prospectus that all registration requirements have been met and that all information are true and correct as represented by the issuer or the one making the statement. Any untrue statement of fact or omission to state a material fact required to be stated herein or necessary to make the statement therein not misleading shall constitute fraud. Section 13. Rejection and Revocation of Registration of Securities. 13.1. The Commission may reject a registration statement and refuse registration of the security there-under, or revoke the affectivity of a registration statement and the registration of the security there-under after the due notice and hearing by issuing an order to such effect, setting forth its finding in respect thereto, if it finds that: (a) The issuer: (i) Has been judicially declared insolvent; (ii) Has violated any of the provision of this Code, the rules promulgate pursuant thereto, or any order of the Commission of which the issuer has notice in connection with the offering for which a registration statement has been filed (iii) Has been or is engaged or is about to engage in fraudulent transactions; (iv) Has made any false or misleading representation of material facts in any prospectus concerning the issuer or its securities;

(v) Has failed to comply with any requirements that the Commission may impose as a condition for registration of the security for which the registration statement has been filed; or (b) The registration statement is on its face incomplete or inaccurate in any material respect or includes any untrue statements of a material fact required to be stated therein or necessary to make the statement therein not misleading; or (c) The issuer, any officer, director or controlling person performing similar functions, or any under writer has been convicted, by a competent judicial or administrative body, upon plea of guilty, or otherwise, of an offense involving moral turpitude and /or fraud or is enjoined or restrained by the Commission or other competent or administrative body for violations of securities, commodities, and other related laws. For the purposes of this subsection, the term "competent judicial or administrative body" shall include a foreign court of competent jurisdiction as provided for under Rules of Court. 13.2. The Commission may compel the production of all the books and papers of such issuer, and may administer oaths to, and examine the officers of such the issuer or any other person connected therewith as to its business and affairs. 13.3. If any issuer shall refuse to permit an examination to be made by the Commission, its refusal shall be ground for the refusal or revocation of the registration of its securities. 13.4. If the Commission deems its necessary, it may issue an order suspending the offer and sale of the securities pending any investigation. The order shall state the grounds for taking such action, but such order of suspension although binding upon the persons notified thereof, shall be deemed confidential, and shall not be published. Upon the issuance of the suspension order, no further offer or sale of such security shall be made until the same is lifted or set aside by the Commission. Otherwise, such sale shall be void. 13.5. Notice of issuance of such order shall be given to the issuer and every dealer and broker who shall have notified the Commission of an intention to sell such security. 13.6. A registration statement may be withdrawn by the issuer only with the consent of the Commission. Section 14. Amendment to the Registration Statement. 14.1. If a registration statement is on its face incomplete or inaccurate in any material respect, the Commission shall issue an order directing the amendment of the registration statement. Upon compliance with such order, the amended registration statement

shall become effective in accordance with the procedure mentioned in Subsection 12.6 hereof. 14.2. An amendment filed prior to the effective date of the registration statement shall recommence the forty-five (45) day period within which the Commission shall act on a registration statement. An amendment filed after the effective date of the registration statement shall become effective only upon such date as determined by the Commission. 14.3. If any change occurs in the facts set forth in a registration statement, the issuer shall file an amendment thereto setting forth the change. 14.4. If, at any time, the Commission finds that the registration statement contains any false statement or omits to state any fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may conduct an examination, and, after due notice and hearing, issue an order suspending the affectivity registration statement. If the statement is duly amended, the suspension order may be lifted. 14.5. In making such examination the Commission or any officer or officers designated by it may administer oaths and affirmations and shall have access to, and may demand the production of, any books, records or documents relevant to the examination. Failure of the issuer, underwriter, or any other person to cooperate, or his obstruction or refusal to undergo an examination, shall be a ground for the issuance of a suspension order. Section 15. Suspension of Registration. - 15.1. If at any time, the information contained in the registration statement filed is or has become misleading, incorrect, inadequate or incomplete in any material respect, or the sale or offering for sale of the security registered thereunder may work or tend to work a fraud, the Commission may require from the issuer such further information as may in its judgement be necessary to enable the Commission to ascertain whether the registration of such security should be revoked on any ground specified in this Code. The Commission may also suspend the right to sell and offer for the sale such security pending further investigation, by entering an order specifying the grounds for such action, and by notifying the issuer, underwriter, dealer or broker known as participating in such offering. 15.2. The refusal to furnish information required by the Commission may be a ground for the issuance of an order of suspension pursuant to Subsection 15.1. Upon the issuance of any such order and notification to the issuer, underwriter, dealer or broken know as participating in such offering, no further offer or sale of

any such security shall be made until the same is lifted or set aside by the Commission. Otherwise such sale shall be void. 15.3. Upon issuance of an order of suspension, the Commission shall conduct a hearing. If the Commission determines that the sale of any security should be revoked is shall issue an order prohibiting sale of such security. 15.4. Until the issuance of a final order, the suspension of the right to sell, though binding upon the persons notified there of, shall be deemed confidential, and shall not be published, unless it shall appear that the order of suspension has been violated after notice. If, however, the Commission finds that the sale of the security will neither be fraudulent nor result in fraud, it shall forthwith issue an order revoking the order of suspension, and such security shall be restored to its status as a registered security as of the date of such order of suspension. CHAPTER IV REGULATION OF PRE-NEED PLANS Section 16. Pre-Need Plans. No person shall sell or offer for sale to the public any pre-need plan except in accordance with rules and regulations which the Commission shall prescribe. Such rules shall regulate the sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing persons involved in the sale of pre- need plans, requiring disclosures to prospective plan holders, prescribing advertising guidelines, providing for uniform accounting system, reports and recording keeping with respect to such plans, imposing capital, bonding and other financial responsibility, and establishing trust funds for the payment of benefits under such plans. CHAPTER V REPORTORIAL REQUIREMENTS Section 17. Periodic and Other Reports of Issuer. 17.1. Every issuer satisfying the requirements in Subsection 17.2 hereof shall file with the Commission: (a) Within one hundred thirty-five (135) days, after the end of the issuers fiscal year, or such other time as the Commission may prescribe, an annual report which shall include, among others, a balance sheet, profit and loss statement and statement of cash flows, for such last fiscal year, certified public accountant, an a management discussion and analysis of results of operation; and (b) Such other periodical reports for interim fiscal periods and current reports on significant developments of the issuer as the Commission may prescribe as necessary to keep current information on the operation of the business and financial condition of the issuer.

17.2. The reportorial requirements of Subsection 17.1 shall apply to the following: (a) An issuer which has sold a class of its securities pursuant to a registration under section 12 hereof: Provided however, That the obligation of such issuer to file reports shall be suspended for any fiscal year after the year such registration became effective if such issuer, as of the first day of any such fiscal year, has less than one hundred (100) holder of such class securities or such other number as the Commission shall prescribe and it notifies the Commission of such; (b) An issuer with a class of securities listed for trading on an Exchange; and (c) An issuer with assets of at least Fifty million pesos (50,000,000.00) or such other amount as the Commission shall prescribe, and having two hundred (200) or more holder each holding at least one hundred (100) share of a class of its equity securities: Provided, however, That the obligation of such issuer to file report shall be terminate ninety (90) days after notification to the Commission by the issuer that the number of its holders holding at least one hundred (100) share reduced to less than one hundred (100). 17.3. Every issuer of a security listed for trading on an Exchange a copy of any report filed with the Commission under Subsection 17.1. hereof. 17.4. All reports (including financial statements) required to be filed with the Commission pursuant to Subsection 17.1 hereof shall be in such form, contain such information and be filed at such times as the Commission shall prescribe, and shall be in lieu of any periodical or current reports or financial statements otherwise required to be filed under the Commission shall prescribe. 17.5. Every issuer which has a class of equity securities satisfying any of the requirements in Subsection 17.2 shall furnish to each holder of such equity security an annual report in such form and containing such information as the Commission shall prescribe. 17.6. Within such period as the Commission may prescribe preceding the annual meeting of the holders of any equity security of a class entitled to vote at such meeting , the issuer shall transmit to such holders an annual report in conformity with subsection 17.5. Section 18. Reports by five per centum (5%) Holders of Equity Securities. 18.1. In every case in which an issuer satisfies the requirements of Subsection 17.2 hereof any person who acquires directly or indirectly the beneficial ownership of more than five of per centum (5%) of such class or in excess of such lesser per centum as the Commission by rule may prescribe, shall, within ten (10) days after such acquisition or such reasonable time as fixed by the Commission, submit to the

issuer of the securities, to the Exchange where the security is traded, and to the Commission a sworn statement containing the following information and such order information as the Commission may require in the public interest or for the protection of investors. (a) The personal background, identity, residence, and citizenship of, and the nature of such beneficial ownership by, such person and all other person by whom or on whose behalf the purchases are effected; in the event the beneficial owner is a juridical person, the of business of the beneficial owner shall also be reported; (b) If the purpose of the purchases or prospective purchases is to acquire control of the business of the issuer of the securities, any plans or proposals which such persons may have that will effect a major change in its business or corporate structure; (c) The number of shares of such security which are beneficially owned, and the number of shares concerning which there is a right to acquire, directly or indirectly, by; (i) such person, and (ii) each associate of such person, giving the background, identity, residence, and citizenship of each such associate; and (d) Information as to any contracts, arrangements, or understanding with any person with respect to any securities of the issuer including but not limited to transfer, joint ventures, loan or option arrangements, puts or call guarantees or division of losses or profits, or proxies naming the persons with whom such contracts, arrangements, or understanding have been entered into, and giving the details thereof. 18.2. If any change occurs in the facts set forth in the statements, an amendment shall be transmitted to the issuer, the Exchange and the Commission. 18.3. The Commission, may permit any person to file in lieu of the statement required by subsection 17.1 hereof, a notice stating the name of such person, the shares of any equity securities subject to Subsection 17.1 which are owned by him, the date of their acquisition and such other information as the commission may specify, if it appears to the commission that such securities were acquired by such person in the ordinary course of his business and were not acquired for the purpose of and do not have the effect of changing or influencing the control of the issuer nor in connection with any transaction having such purpose or effect. CHAPTER VI PROTECTION OF SHAREHOLDERS INTERESTS Section 19. Tender Offers. Any person or group of persons acting in concert who intends to acquire at least 15% of any class of any equity security of a listed corporation of any class of any equity security of a corporation with assets of at least fifty million pesos (50,000,000.00) and having two hundred(200) or more stockholders

at least one hundred shares each or who intends to acquire at least thirty percent(30%) of such equity over a period of twelve months(12) shall make a tender offer to stockholders by filling with the Commission a declaration to that effect; and furnish the issuer, a statement containing such of the information required in Section 17 of this Code as the Commission may prescribe. Such person or group of persons shall publish all request or invitations or tender offer or requesting such tender offers subsequent to the initial solicitation or request shall contain such information as the Commission may prescribe, and shall be filed with the Commission and sent to the issuer not alter than the time copies of such materials are first published or sent or given to security holders. (a) Any solicitation or recommendation to the holders of such a security to accept or reject a tender offer or request or invitation for tenders shall be made in accordance with such rules and regulations as may be prescribe. (b) Securities deposited pursuant to a tender offer or request or invitation for tenders may be withdrawn by or on behalf of the depositor at any time throughout the period that tender offer remains open and if the securities deposited have not been previously accepted for payment, and at any time after sixty (60) days from the date of the original tender offer to request or invitation, except as the Commission may otherwise prescribe. (c) Where the securities offered exceed that which person or group of persons is bound or willing to take up and pay for, the securities that are subject of the tender offers shall be taken up us nearly as may be pro data, disregarding fractions, according to the number of securities deposited to each depositor. The provision of this subject shall also apply to securities deposited within ten (10) days after notice of increase in the consideration offered to security holders, as described in paragraph (e) of this subsection, is first published or sent or given to security holders. (d) Where any person varies the terms of a tender offer or request or invitation for tenders before the expiration thereof by increasing the consideration offered to holders of such securities, such person shall pay the increased consideration to each security holder whose securities are taken up and paid for whether or not such securities have been taken up by such person before the variation of the tender offer or request or invitation. 19.2. It shall be lawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made in the light of the circumstances under which they are made, not misleading, or to engaged to any fraudulent, deceptive or manipulative acts or

practices, in connection with any tender offer or request or invitation for tenders, or any solicitation for any security holders in opposition to or in favor of any such favor of any such offer, request, or invitation. The Commission shall, for the purposes of this subsection, define and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive and manipulative. Section 20. Proxy solicitations. - 20.1. Proxies must be issued and proxy solicitation must be made in accordance with rules and regulations to be issued by the Commission; 20.2. Proxies must be in writing, signed by the stockholder or his duly authorized representative and file before the scheduled meeting with the corporate secretary. 20.3. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid only for the meting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at one time. 20.4. No broker or dealer shall give any proxy, consent or any authorization, in respect of any security carried for the account of the customer, to a person other than the customer, without written authorization of such customer. 20.5. A broker or dealer who holds or acquire the proxy for at least ten percent (10%) or such percentage as the commission may prescribe of the outstanding share of such issuer, shall submit a report identifying the beneficial owner of ten days after such acquisition, for its own account or customer, to the issuer of security, to the exchange where the security is traded and to the Commission. Section 21. Fees of Tender Offers and Certain Proxy Solicitations. At the time of filling with the Commission of any statement required under Section 19 for any tender offer or Section 72.2 for issuer purchases, or Section 20 for proxy or consent solicitation, The Commission may require that the person making such filing pay a fee of not more than one-tenth (1/10)(1%) of; 21.1. The propose aggregate purchase price in the case of a transaction under Section 20 or 72.2; or 21.2. The proposed payment in cash, and ion value of any securities or property to be transferred in the acquisition, merger or consolidating, or the cash and value of any securities proposed to be received upon the sale disposition of such assets in the case of a solicitation under Section 20. The Commission shall prescribe by rule diminishing fees in inverse proportion to the value of the aggregate price of the offering. Section 22. Internal Record Keeping and Accounting Control. - Every issuer which has a class of securities that satisfies the requirements of Subsection 17.2 shall:

22.1. Device and maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (a) Transactions and access to assets are pursuant to management authorization; (b) Financial statements are provided in conformity with generally accepted accounting principles that are adopted by the Accounting standards council and the rules promulgated by the Commission with the regard to the preparation of the financial statements; and (c) Recorded assets are compared with existing assets at reasonable intervals and differences are reconciled. Section 23. Transactions of Directors officers and Principal Stockholders. 23.1. Every person who is directly or indirectly the beneficial owner of more than ten per centum (10%) of any class of any equity security which satisfies the requirements of subsection 17.2, or who is a director or an officer of the issuer of such security, shall file, at the time either such requirement is first satisfied or after ten days after he becomes such a beneficial owner, director, or officer, a statement form the Commission and, if such security is listed for trading on an exchange, also with the exchange of the amount of all the equity security of such issuer of which he is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month. 23.2. For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director or officer by reason of his relationship to the issuer, any profit realized by him from any purchase or sale, or any sale or purchase, of any equity security of such issuer within any period of less than (6) months unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention of holding the security purchased or of not repurchasing the security sold for a period exceeding six (6) months. Suit to recover such profit may be instituted before the Regional Trial Court by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty (60) days after request or shall fail diligently to prosecute the same thereafter, but not such shall be brought more than two years after the date such profit was realized. This Subsection shall not be construed to cover any transaction were such beneficial owner was not such both time of the owner or the sale, or the sale of purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.

23.3. It shall be unlawful for any such beneficial owner, director or officer, directly or indirectly, to sell any equity security of such issuer if the person selling the principal: (a) Does not own the security sold: or (b) If owning the security, does not deliver not deliver it against such sale within 20 days thereafter, or does not within five days after such sale deposit in the mails or the unusual channels of transportation; but no person shall be deemed to have violated this subsection if he proves not withstanding the exercise of good faith he was unable to make such delivery in such time, or that to do so would cause undue inconvenience or expense. 23.4. The provisions of subsection 23.2 shall not apply to any purchase and sale, or sale and purchase, and the provisions of Subsection 23.3 shall not apply to any sale, of an equity security not then or thereafter held by him and an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market, otherwise than on an Exchange, for such security. The Commission may, by such rules and regulations as it deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market. CHAPTER VII PROHIBITIONS AND FRAUD, MANIPULATION AND INSIDER TRADING Section 24. Manipulation of Security Prices; Devices and Practices. 24.1 It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly: (a) To create a false or misleading appearance of active trading in any listed security traded in an Exchange of any other trading market (hereafter referred to purposes of this Chapter as "Exchange"): (i) By effecting any transaction in such security which involves no change in the beneficial ownership thereof; (ii) By entering an order or orders for the purchase or sale of such security with the knowledge that a simultaneous order or orders of substantially the same size, time and price, for the sale or purchase of any such security, has or will be entered by or for the same or different parties; or (iii) By performing similar act where there is no change in beneficial ownership. (b) To affect, alone or with others, a securities or transactions in securities that: (I) Raises their price to induce the purchase of a security, whether of the same or a different class of the same issuer or of controlling, controlled, or commonly controlled

company by others; or (iii) Creates active trading to induce such a purchase or sale through manipulative devices such as marking the close, painting the tape, squeezing the float, hype and dump, boiler room operations and such other similar devices. (c) To circulate or disseminate information that the price of any security listed in an Exchange will or is likely to rise or fall because of manipulative market operations of any one or more persons conducted for the purpose of raising or depressing the price of the security for the purpose of inducing the purpose of sale of such security. (d) To make false or misleading statement with respect to any material fact, which he knew or had reasonable ground to believe was so false or misleading, for the purpose of inducing the purchase or sale of any security listed or traded in an Exchange. (e) To effect, either alone or others, any series of transactions for the purchase and/or sale of any security traded in an Exchange for the purpose of pegging, fixing or stabilizing the price of such security; unless otherwise allowed by this Code or by rules of the Commission. 24.2. No person shall use or employ, in connection with the purchase or sale of any security any manipulative or deceptive device or contrivance. Neither shall any short sale be effected nor any stop-loss order be executed in connection with the purchase or sale of any security except in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest for the protection of investors. 24.3. The foregoing provisions notwithstanding, the Commission, having due regard to the public interest and the protection of investors, may, by rules and regulations, allow certain acts or transactions that may otherwise be prohibited under this Section. Section 25. Regulation of Option Trading. No member of an Exchange shall, directly or indirectly endorse or guarantee the performance of any put, call, straddle, option or privilege in relation to any security registered on a securities exchange. The terms "put", "call", "straddle", "option", or "privilege" shall not include any registered warrant, right or convertible security. Section 26. Fraudulent Transactions. It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities to: 26.1. Employ any device, scheme, or artifice to defraud;

26.2. Obtain money or property by means of any untrue statement of a material fact of any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or 26.3. Engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person. Section 27. Insiders Duty to Disclose When Trading. 27.1. It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect to the issuer or the security that is not generally available to the public, unless: (a) The insider proves that the information was not gained from such relationship; or (b) If the other party selling to or buying from the insider (or his agent) is identified, the insider proves: (I) that he disclosed the information to the other party, or (ii) that he had reason to believe that the other party otherwise is also in possession of the information. A purchase or sale of a security of the issuer made by an insider defined in Subsection 3.8, or such insiders spouse or relatives by affinity or consanguinity within the second degree, legitimate or common-law, shall be presumed to have been effected while in possession of material nonpublic information if transacted after such information came into existence but prior to dissemination of such information to the public and the lapse of a reasonable time for market to absorb such information: Provided, however, That this presumption shall be rebutted upon a showing by the purchaser or seller that he was aware of the material nonpublic information at the time of the purchase or sale. 27.2. For purposes of this Section, information is "material nonpublic" if: (a) It has not been generally disclosed to the public and would likely affect the market price of the security after being disseminated to the public and the lapse of a reasonable time for the market to absorb the information; or (b) would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold a security. 27.3. It shall be unlawful for any insider to communicate material nonpublic information about the issuer or the security to any person who, by virtue of the communication, becomes an insider as defined in Subsection 3.8, where the insider communicating the information knows or has reason to believe that such person will likely buy or sell a security of the issuer whole in possession of such information. 27.4. (a) It shall be unlawful where a tender offer has commenced or is about to commence for: (i) Any person (other than the tender offeror) who is in possession of material nonpublic information relating to such tender offer, to buy or sell the securities of the

issuer that are sought or to be sought by such tender offer if such person knows or has reason to believe that the information is nonpublic and has been acquired directly or indirectly from the tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, or any insider of such issuer; and (ii) Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, and any insider of such issuer to communicate material nonpublic information relating to the tender offer to any other person where such communication is likely to result in a violation of Subsection 27.4 (a)(I). (b) For purposes of this subsection the term "securities of the issuer sought or to be sought by such tender offer" shall include any securities convertible or exchangeable into such securities or any options or rights in any of the foregoing securities. CHAPTER VIII REGULATION OF SECURITIES MARKET PROFESSIONALS Section 28. Registration of Brokers, Dealers, Salesmen and Associated Persons. 28.1. No person shall engage in the business of buying or selling securities in the Philippine as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the Commission. 28.2. No registered broker or dealer shall employ any salesman or any associated person, and no issuer shall employ any salesman, who is not registered as such with the Commission. 28.3. The Commission, by rule or order, may conditionally or unconditionally exempt from subsection 28.1 and 28.2 any broker, dealer, salesman, associated person of any broker or dealer, or any class of the foregoing, as it deems consistent with the public interest and the protection of investors. 28.4. The Commission shall promulgate rules and regulation prescribing the qualifications for registration of each category of applicant, which shall, among other things, require as a condition for registration that: (a) If a natural person, the applicant satisfactorily pass a written examination as to his proficiency and knowledge in the area of activity for which registration is sought; (b) In the case of a broker or dealer, the applicant satisfy a minimum net capital as prescribed by the Commission, and provide a bond or other security as the

Commission may prescribe to secure compliance with the provisions of this Code; and (c) If located outside of the Philippines, the applicant files a written consent to service of process upon the Commission pursuant to Section 65 hereof. 28.5. A broker or dealer may apply for registration by filing with the Commission a written application in such forms and containing such information and documents concerning such broker or dealer as the Commission by rule shall prescribe. 28.6. Registration of a salesman or of an associated person of a registered broker or dealer may be made upon written application filed with the Commission by such salesman or associated person. The application shall be separately signed and certified by the registered broker or dealer to which such salesman or associated person is to become affiliated, or by the issuer in the case of a salesman employed appointed or authorized solely by such issuer. The application shall be in such form and contain such information and documents concerning the salesman or associated person as the Commission by rule shall prescribe. For purposes of this Section, a salesman shall not include any employee of an issuer whose compensation is not determined directly or indirectly on sales of securities if the issuer. 28.7. Applications filed pursuant to Subsections 28.5 and 28.6 shall be accompanied by a registration fee in such reasonable amount prescribed by the Commission. 28.8. Within thirty (30) days after the filing of any application under this Section, the Commission shall by order: (a) Grant registrations if it determines that the requirements of this Section and the qualifications for registrations set forth in its rules and regulations have been satisfied ; or (b) Deny said registration. 28.9. The names and addresses of all persons approved for the registration as brokers, dealers, associated persons or salesman and all orders of the Commission with respect thereto shall be recorded in a Register of Securities Market Professionals kept in the office of the Commission which shall be open to public inspection. 28.10. Every person registered pursuant to this Section shall file with the Commission, in such form as the Commission shall prescribe, information necessary to keep the application for registration current and accurate, including in the case of a broker or dealer changes in salesmen, associated persons and owners thereof. 28.11. Every person registered pursuant to this Selection shall pay to the Commission an annual fee at such time and in such reasonable amount as the Commission shall prescribe. Upon notice by the Commission that such annual fee has not been paid as required, the registration of such person shall be suspended until payment has been made.

28.12. The registration of a salesman or associated person shall be automatically terminated upon the cessation of his affiliation with said registered broker or dealer or with an issuer in the case of a salesman employed, appointed or authorized by such issuer. Promptly following any such cessation of affiliation, the registered broker or dealer, issuer as the case may be, shall file with the Commission a notice of separation of such salesman or associated person. Section 29. Revocation, Refusal or Suspension of Registration of Brokers, Dealers, Salesmen and Associated Persons. 29.1. Registration under Section 28 of this Code may be refused , or any registration granted thereunder may be revoked, suspended, or limitations placed thereon, by the Commission if, after due notice and hearing the Commission determines the application or registrant. (a) Has willfully violated any provision of this Code, any rule, regulation or order made hereunder, or any other law administered by the Commission, or in the case of a registered broker, dealer or associated persons has failed to supervise, with a view to preventing such violation, another person who commits such violation; (b) Has willfully made or caused to be made a materially false or misleading statement in any application for registration or report filed with the Commission or a self-regulatory organization, or has willfully omitted to state any material fact that is required to be stated therein; (c) Has failed to satisfy the qualifications or requirements for registration prescribed under Section 28 and the rules and regulations of the Commission promulgated thereunder; (d) Has been convicted, by a competent judicial or administrative body of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa, misappropriation, forgery, bribery, false oath, or perjury, or of a violation of securities, commodities, banking, real state or insurance laws; (e) Is enjoined or restrained by a competent judicial or administrative body from engaging in securities, commodities, banking, real state or insurance activities or from willfully violating laws governing such activities; (f) Is subject to an order of a competent judicial or administrative body refusing, revoking or suspending any registration, licensed or other permit under this Code, the rules and regulations promulgated thereunder, any other law administered by the Commission; (g) Is subject to an order of a self-regulatory organization suspending or expelling him from membership or participating therein or from association with a member or participant thereof;

(h) Has been found by a competent judicial or administrative body to have willfully violated any provisions of securities, commodities, banking, real state or insurance laws, or has willfully aided, abetted, counseled, commanded, induced or procured such violation; or (i) Has been judicially declared insolvent. For purposes of this subsection, the term "competent judicial or administrative body" shall include a foreign court of competent jurisdiction and a foreign financial regulator. 29.2. (a) In case of charges against a salesman or associated person, notice thereof shall also be given the broker, dealer or issuer employing such salesman or associated person. (b) Pending the hearing, the Commission shall have the power to order the suspensions of such brokers, dealers, associated persons or salesmans registration: Provided, That such order shall state the cause for such suspension. Until the entry of a final order, the suspension of such registration, though binding upon the persons notified thereof, shall be deemed confidential, and shall not be published, unless it shall appear that the order of suspension has been violated after notice. 29.3. The orders of the Commission refusing, revoking, suspending or placing limitations on a registration as herein above provided, together with its findings, shall be entered in the Register of Securities Market Professionals. The suspension or revocation of the registration of a dealer or broker shall also automatically suspend the registration of all salesmen and associated persons affiliated with such broker or dealer. The order of the Commission refusing, revoking, suspending or placing limitations on a registration as herein above provided, together with its findings, shall be entered in the Register of Securities Market Professionals. The suspension or revocation of the registration of a dealer or broker shall also automatically suspend the registration of a dealer or broker shall also automatically suspend the registration of all salesmen and associated persons affiliated with such broker or dealer. 29.4. It shall be sufficient cause for refusal, revocation or suspension of a brokers or dealers registrations, if any associated person thereof or any juridical entity controlled by such associated person has committed any act or omission or is subject to any disability enumerated in paragraphs (a) through (i) of Subsection 29. I hereof. Section 30. Transactions and Responsibility of Brokers and Dealers. 30.1 No brokers or dealer shall deal in or otherwise buy or sell, for its own account or for its own account or for the account of customers, securities listed on an Exchange issued by any corporation where any stockholders, director, associated person or salesman, or authorized clerk of said broker or dealer and all the relatives of the foregoing within

the fourth civil degree of consanguinity or affinity, is at the same time holding office in said issuer corporation as a director, president, vice-president, manager, treasurer, comptroller, secretary or any office trust and responsibility, or is a controlling of the issuer. 30.2. No broker or dealer shall effect any transaction in securities or induce or attempt to induce the purchase or sale of any security except in compliance with such rules and regulations as the Commission shall prescribe to ensure fair and honest dealings in securities and provide financial safeguards and other standards for the operations of brokers and dealers, including the establishments of minimum net capital requirements, the acceptance of custody and use of securities of customers, and the carrying and use of deposits and credit balances of customers. Section 31. Development of Securities Market Professionals. The Commission in joint undertaking with self regulatory organizations, organizations and associations of finance professionals as well as private educational and research institute shall undertake or facilitate/organize continuing training, conferences/seminars, updating programs, research and developments as well as technology transfer at the latest and advance trends in issuance and trading of securities, derivatives, commodity trades and other financial instruments, as well as securities markets of other countries. CHAPTER IX EXCHANGES AND OTHER SECURITIES TRADING MARKETS Section 32. Prohibition on Use of Unregistered Exchange; Regulation of Over-theCounter Markets. 32.1. No broker, dealer, salesman, associated person of a broker or dealer, or Exchange, directly or indirectly shall make use of any facility of an Exchange in the Philippines to effect any transaction in a security, or to report such transaction, unless such Exchange is registered as such under Section 33 of this Code. 32.2. (a) No broker, dealer, salesman or associated person of a broker or dealer, singly or in concert with any other person, shall make, create or operate, or enable another to make, create or operate, any trading market, otherwise than on a registered Exchange, for the buying and selling of any security, except in accordance with rules and regulations the Commission may prescribe. (b) The Commission may promulgate rules and regulations governing transactions by brokers, dealers, salesmen or associated persons of a broker or dealer, over any facilities of such trading market and may require such market to be administered by a self-regulatory organization determined by the Commission as capable of

insuring the protection of investors comparable to that provided in the case of a registered Exchange. Such self-regulatory organization must provide a centralized marketplace for trading and must satisfy requirements comparable to those prescribed for registration of Exchanges in Section 33 of this Code. Section 33. Registration of Exchanges. 33.1. Any Exchange may be registered as such with the Commission under the terms and conditions hereinafter provided in this Section and Section 40 hereof, by filing an application for registration in such form and containing such information and supporting documents as the Commission by rule shall prescribe, including the following: (a) An undertaking to comply and enforce by its members with the provisions of this Code, its implementing rules and regulations and the rules of the Exchange; (b) The organizational charts of the Exchange, rules of procedure, and a list of its officers and members; (c) Copies of the rules of the Exchange; and (d) An undertaking that in the event a member firm becomes insolvent or when the Exchange shall have found that the financial condition of its member firm has so deteriorated that it cannot readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds, the Exchange shall, upon order of the Commission, take over the operation of the insolvent member firm and immediately proceed to settle the member firms liabilities to its customers. 33.2. Registrations of an Exchange shall be granted upon compliance with the following provisions: (a) That the applicant is organized as a stock corporation: Provided, That any registered Exchange existing prior to the effectivity of this Code shall within one (1) year reorganize as a stock corporation pursuant to a demutualization plan approved by the Commission; (b) That the applicant is engaged solely in the business of operating an exchange: Provided, however, That the Commission may adopt rules, regulations or issue an order, upon application, exempting an Exchange organized as a stock corporation and owned and controlled by another juridical person from the restriction. (c) Where the Exchange is organized as a stock corporation, that no person may beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange and no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange: Provided, however, That the Commission may adopt rules, regulations or issue an order, upon application from this prohibition where it finds

that such ownership or control will not negatively impact on the exchanges ability to effectively operate in the public interest. (d) The expulsion, suspension, or disciplining of a member and persons associated with a member for conduct or proceeding inconsistent with just and equitable principles of fair trade, and for violations of provisions of this Code, or any other Act administered by the Commission, the rules, regulations and orders thereunder, or the rules of the Exchange; (e) A fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person seeking to be a member, the barring of any person from association with a member, and the prohibition or limitation of any person from association with member, and the prohibition or limitation of any person from access to services offered by the Exchange; (f) That the brokers in the board of the Exchange shall comprise of not more than forty-nine percent (49%) of such board and shall proportionately represent the Exchange membership in terms of volume/value or trade and paid up capital, and that any natural person associated with a juridical entity that is a member for this purpose; Provide, That any registered Exchange existing prior to the affectivity of this Code shall immediately comply with this requirement; (g) For the board of the Exchange to include in its composition (1) the president of the Exchange, and (ii) no less than fifty one percent (51%) of the remaining members of the board to be comprised of three (3) independent directors and persons who represent the interests of issuers, investors, and other market participants, who are not associated with any broker or dealer or member of the Exchange for a period of two (2) years prior to his/her appointment. No officer or employee of a member, its subsidiaries or affiliates or related interests shall become an independent director: Provided, however, That the Commission may by rule, regulation, or order upon application, permit the exchange organized as a stock corporation to use a different governance structure: Provided, further, That the Commission is satisfied that the Exchange is acting in the public interest and is able to effectively operate as a self-regulatory organization under this Code: Provided, finally, That any registered exchange existing prior to the affectivity of this Code shall immediately comply with this requirement. (h) The president and other management of the Exchange to consist only of persons who are not members and are not associated in any capacity, directly or indirectly with any broker or dealer or member or listed company of the Exchange: Provided, That the Exchange may only appoint, and a person may only serve, as an officer of the exchange if such person has not been a member or affiliated with

any broker, dealer, or member of the Exchange for a period of at least two (2) years prior to such appointment; (i) The transparency of transactions on the Exchange; (j) The equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the Exchange operates or controls; (k) Prevention of fraudulent and manipulative acts and practices, promotion of just and equitable principles of trade, and, in general, protection of investors and the public interest; and (l) The transparent, prompt and accurate clearance and settlement of transactions effected on the Exchange. 33.3. If the Commission finds that the applicant Exchange is capable of complying and enforcing compliance by its members, and persons associated with such members, with the provisions of this Code, and the rules of the Exchange, and that the rules of Exchange are fair, just and adequate, the Commission shall cause such Exchange to be registered. If, after notice due and hearing, the Commission finds otherwise, the application shall be denied. 33.4. Within ninety (90) days after the filing of the application the Commission may issue an order either granting or denying registration as an Exchange, unless the Exchange applying for registration shall withdraw its application or shall consent to the Commissions deferring action on its application for a stated longer period after the date of filing. The filing with the Commission of an application for registration by an Exchange shall be deemed to have taken place upon the receipt thereof. Amendments to an application may be made upon such terms as the Commission may prescribe. 33.5. Upon the registration of an Exchange, it is shall pay a fee in such amount and within such period as the Commission may fix. 33.6. Upon appropriate application in accordance with the rules and regulations of the Commission and upon such terms as the Commission may deemed necessary for the protection of investors, an exchange may withdraw its registration or suspend its operations or resume the same. Section 34. Segregation and Limitation of functions of Members, Broker and Dealers. 34.1. It shall be unlawful for any member-broker of an Exchange to effect any transaction on such Exchange for its own account, the account of an associated person, or an account with the respect to which it or an associated person thereof

exercises the investment discretion: Provided, however, That this Section shall not make unlawful(a) Any transaction by a member-broker acting in the capacity of a market maker; (b) Any transaction reasonably necessary to carry on an odd-lot transactions; (c) Any transaction to offset a transaction made in error; and (d) Any other transaction of a similar nature as may be defined by the Commission. 34.2. In all instances where the member-broker effects a transaction on an Exchange for its own account or the account of an associated person or an account with the respect to which it exercises investment discretion, it shall disclose to such customer at or before the completion of the transaction it is acting for its own account: Provided, further, That this fact shall be reflected in the order ticket and the confirmation slip. 34.3. Any member-broker who violates the provisions of this Section shall be subject to the administrative sanctions provided in Section 54 of this Code. Section 35. Additional Fees of Exchanges. In addition to the registration fee prescribed in Section 33 of this Code, every Exchange shall pay to the Commission, on a semestral basis on or before the tenth day of the end of the end of every semester of the calendar year, a fee in such an amount as the Commission shall prescribe, but not more than one-hundredth of one per centum (1%) of the aggregate amount of the sales of securities transacted on such Exchange during the preceding calendar year for the privilege of doing business, during the preceding calendar year or any part thereof. Section 36. Powers with Respect to Exchanges and Other Trading Market. 36.1. The Commission is authorized, if in its opinion such action is necessary or appropriate for the protection of investors and the public interest so requires, summarily to suspend trading in any listed security on any Exchange or other trading market for a period not exceeding thirty (30) days but not exceeding ninety (90) days: Provided, however, That the Commission promptly following the issuance of the order of suspension, shall notify the affected issuer of the reasons for such suspension and provide such issuer with an opportunity for hearing to determine whether the suspension should be lifted. 36.2. Wherever two (2) or more Exchanges or other trading markets exist, the Commission may require and enforce uniformity of trading regulations in and/or between or among said Exchanges or other trading markets.

36.3. In addition to the existing Philippine Stock Exchange, the Commission shall have the authority to determine the number, size and location of stock Exchanges, other trading markets and commodity Exchanges and other similar organizations in the light of national or regional requirements for such activities with the view to promote, enhance, protect, conserve or rationalize investment. 36.4. The Commission, having due regard to the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers, dealers, clearing agencies, and transfer agents, shall promulgate rules and regulations for the prompt and accurate clearance and settlement of securities transactions. 36.5. (a) The Commission may establish or facilitate the establishment of trust funds which shall be contributed by Exchanges, brokers, dealers, underwriters, transfer agents, salesmen and other persons transacting in securities, as the Commission may require, for the purpose of compensating investors for the extraordinary losses or damage they may suffer due to business failure or fraud or mismanagement of the persons with whom they transact, under such rules and regulations as the Commission may from time to time prescribe or approve in the public interest. (b) The Commission may, having due regard to the public interest or the protection of investors, regulate, supervise, examine, suspend or otherwise discontinue such and other similar funds under such rules and regulations which the Commission may promulgate, and which may include taking custody and management of the fund itself as well as investments in and disbursements from the funds under such forms of control and supervision by the Commission as it may from time to time require. The authority granted to the Commission under this subsection shall also apply to all funds established for the protection of investors, whether established by the Commission or otherwise. Section 37. Registration of Innovative and Other Trading Markets. The Commission, having due regard for national economic development, shall encourage competitiveness in the market by promulgating within six (6) months upon the enactment of this Code, rules for the registration and licensing of innovative and other trading markets or Exchanges covering, but not limited to, the issuance and trading of innovative securities, securities of small, medium, growth and venture enterprises, and technology-based ventures pursuant to Section 33 of this Code. Section 38. Independent Directors. Any corporation with a class of equity securities listed for trading on an Exchange or with assets in excess of Fifty million pesos (P50,000,000.00) and having two hundred (200) or more holders, at least of two hundred (200) of which are holding at least one hundred (100) shares of a class of its

equity securities or which has sold a class of equity securities to the public pursuant to an effective registration statement in compliance with Section 12 hereof shall have at least two (2) independent directors or such independent directors shall constitute at least twenty percent (20%) of the members of such board whichever is the lesser. For this purpose, an "independent director" shall mean a person other than an officer or employee of the corporation, its parent or subsidiaries, or any other individual having a relationship with the corporation, which would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. CHAPTER X REGISTRATION, RESPONSIBILITIES AND OVERSIGHT OF SELF-REGULATORY ORGANIZATIONS Section 39. Associations of Securities Brokers, and Dealers, and Other Securities Related Organizations. 39.1. The Commission shall have the power to register as a self-regulatory organization, or otherwise grant licenses, and to regulate, supervise, examine, suspend or otherwise discontinue, as a condition for the operation of organizations whose operations are related to or connected with the securities market such as but not limited to associations of brokers and dealers, transfer agents, custodians, fiscal and paying agents, computer services, news disseminating services, proxy solicitors, statistical agencies, securities rating agencies, and securities information processor which are engaged in business of: (a) Collecting, processing, or preparing for distribution or publication, or assisting, participating in, or coordinating the distribution or publication of, information with respect to transactions in or quotations for any security; or (b) Distributing or publishing, whether by means of a ticker tape, a communications network, a terminal display device, or otherwise, on a current and continuing basis, information with respect to such transactions or quotations. The Commission may prescribe rules and regulations which are necessary or appropriate in the public interest or for the protection of investors to govern self-regulatory organizations and other organizations licensed or regulated pursuant to the authority granted in Subsection 39.1 including the requirement of cooperation within and among, and electronic integration of the records of, all participants in the securities market to ensure transparency and facilitate exchange of information. 39.2. An association of brokers and dealers may be registered as a securities association pursuant to Subsection 39.3 by filing with the Commission an application for registration in such form as the Commission, by rule, may prescribe containing the rules of the association and such other information and documents

as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors. 39.3. An association of brokers and dealers shall not be registered as a securities association unless the Commission determines that: (a) The association is so organized and has the capacity to be able to carry out the purposes of this Code and to comply with, and to enforce compliance by its members and persons associated with its members, with the provisions of this Code, the rules and regulations thereunder, and the rules of the association. (b) The rules of the association, notwithstanding anything in the Corporation Code to the contrary, provide that: (i) Any registered broker or dealer may become a member of the association; (ii) There exist a fair representation of its members to serve on the Board of Directors of the association and in the administration of its affairs, and that may any natural person associated with a juridical entity that is a member shall himself be deemed to be a member for this purpose; (iii) The Board of Directors of the association includes in its composition: (a) The president of the association and (b) Person who represent the interests of the issuer and public investors and are not associated with any broker or dealer or member of the association; that the president and other management of the association not be a member or associated with any broker, dealer or member of the association; (iv) For the equitable allocation of reasonable dues, fees, and other charges among member and issuers and other persons using any facility or system which the association operates or controls; (v) For the prevention of fraudulent and manipulative acts and practices, the promotion of just and equitable principles of trade, and, in general, the protection of investors and the public interest; (vi) That its members and persons associated with its members shall be appropriately disciplined for violation of any provision of this Code, the rules and regulations thereunder, or the rules of the association; (vii) That a fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the association of any person with respect to access to services offered by the association or a member thereof.

39.4. (a) A registered securities association shall deny membership to any person who is not a registered broker or dealer. (b) A registered securities association may deny membership to, or condition the membership of, a registered broker or dealer if such broker or dealer: (i) Does not meet the standards of financial responsibility, operational capability, training, experience or competence that are prescribe by the rules of the association; or (ii) Has engaged, and there is a reasonable likelihood it will again engage, in acts or practices inconsistent with just and equitable principles of fair trade. (c) A registered securities association may deny membership to a registered broker or dealer not engage in a type of business in which the rules of the association require members to be engaged: Provided, however, That no registered securities association may deny membership to a registered broker or dealer by reason of the amount of business done by the broker or dealer. A registered securities association may examine and verify the qualifications of an applicant to become a member in accordance with procedure established by the rules of the association. (d) A registered securities association may bar a salesman or person associated with a broker or dealer from being employed by a member or set conditions for the employment of a salesman or associated if such person: (i) Does not meet the standards of training, experience, or competence that are prescribe by the rules of the association; or (ii) Has engage, and there is a reasonable likelihood he will again engage, in acts or practices inconsistent with just and equitable principles of fair trade. A registered securities association may examine and verify the qualifications of an applicant to become a salesman or associated person employed by a member in accordance with the procedures establish by the rules of the association. A registered association also may require a salesman or associated person employed by a member to be registered with the association in accordance with the procedures prescribed in the rules of the association. 39.5. In any proceeding by a registered securities association to determine whether a person shall be denied membership, or barred from association with a member, the association shall provide notice to the person under review of the specific grounds being considered for denial, afford him an opportunity to defend against the allegations, and keep a record of the proceedings. A determination by

the association to deny membership shall be supported by a statement setting forth the specific grounds on which the denial is based. Section 40. Powers with Respect to Self-Regulatory Organizations. - 40.1. Upon the filing of an application for registration as an Exchange under Section 33, a registered securities association under Section 39, a registered clearing agency under Section 42, or other self-regulatory organization under this Section, the Commission shall have ninety (90) days within which to either grant registration should be denied. In the event proceedings are instituted, the Commission shall have two hundred seventy (270) days within which to conclude such proceedings at which time it shall, by order, grant or deny such registration. 40.2. Every self-regulatory organization shall comply with the provision of this Code, the rules and regulations thereunder, and its own rules, and enforce compliance therewith, notwithstanding any provisions of the Corporation Code to the contrary, by its members, persons associated with its members of its participants. 40.3. (a) Each self-regulatory organization shall submit to the Commission for prior approval any proposed rule or amendment thereto, together with a concise statement of the reason and effect of the proposed amendment (b) Within sixty (60) days after submission of a proposed amendment, the Commission shall, by order, approve the proposed amendment. Otherwise, the same may be made effective by the self-regulatory organization. (c) In the event of an emergency requiring action for the protection of investors, the maintenance of fair and orderly markets, or the safeguarding of securities and funds, a self-regulatory organization may put a proposed amendment into effect summarily; Provided however, That the copy of the same shall be immediately submitted to the Commission. 40.4. The Commission is further authorized, if after making appropriate request in writing to a self-regulatory organization that such organization effect on its own behalf specified changes in its rules and practices and, after due to notice and hearing it determines that such changes have not been effected, and that such changes are not necessary, by the rule or regulation or by order, may alter, abrogate or supplement the rules of such self-regulatory organization in so far as necessary or appropriate to effect such changes in respect of such matters as: (a) Safeguards in respect of the financial responsibility of members and adequate provision against the evasion of financial responsibility through the use of corporate forms or special partnerships; (b) The supervision of trading practices;

(c) The listing or striking from listing of any security; (d) Hours of trading; (e) The manner, methods, and place of soliciting business; (f) Fictitious accounts; (g) The time and method of making settlements, payments, and deliveries, and of closing accounts; (h) The transparency of securities transactions and prices; (i) The fixing of reasonable rates of fees, interest, listing and other charges, but not rates of commission; (j) Minimum units of trading; (k) Odd-lot purchases and sales; (l) Minimum deposits on margin accounts; and (m) The supervision, auditing and disciplining of members or participants. 40.5. The Commission, after due notice and hearing, is authorized, in the public interest and to protect investors: (a) To suspend for a period not exceeding twelve (12) months or to revoke the registration of a self-regulatory organization, or to censure or impose limitations on the activities, functions, and operations of such self-organization, if the Commission finds that such a self-regulatory organization has willfully violated or is unable to comply with any provision of this Code or of the rules and regulations thereunder, or its own or has failed to enforce compliance therewith by a member of, person associated with a member, or a participant in such self-regulatory organization; (b) To expel from a self-regulatory organization any member thereof or any participant therein who is subject to an order of the Commission under Section 29 of this Code or is found to have willfully violated any provision of this Code or suspend for a period not exceeding twelve (12) months for violation of any provision of this Code or any other laws administered by the Commission, or rules and regulations thereunder, or effected, directly or indirectly, any transaction for any person who, such member or participant had reason to believe, was violating in respect of such transaction any of such provisions; and (c) To remove from the office or censure any officer or director of a self-regulatory organization if it finds that such officer or director has violated any provision of this Code, any other law administered by the Commission, the rules or regulations

thereunder, or the rules of such self-regulatory organization, abused his authority, without reasonable justification or excuse has failed to enforce compliance with any of such provisions. 40.6. (a) A self-regulatory organization is authorized to discipline a member of or participant in such self-regulatory organization, or any person associated with a member, including the suspension or expulsion of such member or participant, and the suspension or bar from being associated with a member, if such person has engage in acts or practices inconsistent with just and equitable principles of fair trade or in willful violation of any provision of the Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of the self-regulatory organization. In any disciplinary proceeding by a self-regulatory organization (other than a summary proceeding pursuant to paragraph (b) of this subsection) the selfregulatory organization shall bring specific charges, provide notice to the person charged, afford the person charged with an opportunity to defend against the charges, and keep a record of the proceedings. A determination to impose a disciplinary sanction shall be supported by a written statement of the offenses, a summary of the evidence presented and a statement of the sanction imposed. (b) A self-regulatory organization may summarily: (I) Suspend a member, participant or person associated with a member who has been or is expelled or suspended from any other self-regulatory organization; or (ii) Suspend a member who the selfregulatory organization finds to be in such financial or operating difficulty that the member or participant cannot be permitted to continue to do business as a member with safety to investors, creditors, other members, participants or the self-regulatory organization: Provided, That the self-regulatory organization immediately notifies the Commission of the action taken. Any person aggrieved by a summary action pursuant to this paragraph shall be promptly afforded an opportunity for a hearing by the association in accordance with the provisions of paragraph (a) of this subsection. The Commission, by order, may stay a summary action on its own motion or upon application by any person aggrieved thereby, if the Commission determines summarily or after due notice and hearing (which hearing may consist solely of the submission of affidavits or presentation of oral arguments) that a stay is consistent with the public interest and the protection of investors. 40.7. A self-regulatory organization shall promptly notify the Commission of any disciplinary sanction on any member thereof or participant therein, any denial of membership or participation in such organization, or the imposition of any disciplinary sanction on a person associated with a member or a bar of such person from becoming so associated. Within thirty (30) days after such notice, any aggrieved person may appeal to the Commission from, or the Commission from, or the

Commission on its own motion within such period, may institute review of, the decision of the self-regulatory organization, at the conclusion of which, after due notice and hearing (which may consist solely of review of the record before the self-regulatory organization), the Commission shall affirm, modify or set aside the sanction. In such proceeding the Commission shall determine whether the aggrieved person has engaged or omitted to engage in the acts and practices as found by the self-regulatory organization, whether such acts and practices constitute willful violations of this Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of the self-regulatory organization as specified by such organization, whether such provisions were applied in a manner consistent with the purposes of this Code, and whether, with due regard for the public interest and the protection of investors the sanction is excessive or oppressive. 40.8. The powers of the Commission under this Section shall apply to organized exchanges and registered clearing agencies. CHAPTER XI ACQUISITION AND TRANSFER OF SECURITIES AND SETTLEMENT OF TRANSACTION IN SECURITIES Section 41. Prohibition on Use of Unregistered Clearing Agency. It shall be unlawful for any broker, dealer, salesman, associated person of a broker or dealer, or clearing agency, directly or indirectly, to make use of any facility of a clearing agency in Philippines to make deliveries in connection with transaction in securities or to reduce the number of settlements of securities transactions or to allocate securities settlement responsibilities or to provide for the central handling of securities so that transfers, loans and pledges and similar transaction can be made by bookkeeping entry or otherwise to facilitate the settlement of securities transactions without physical delivery of securities certificates, unless such clearing agency is registered as such under Section 42 of this Code or is exempted from such registration upon application by the clearing agency because, in the opinion of the Commission, by reason of the limited volume of transactions which are settled using the clearing agency, it is not practicable and not necessary or appropriate in the public interest or for the protection of investors to require such registration. Section 42. Registration of Clearing Agencies. - 42.1. Any clearing agency may be registered as such with the Commission under the terms and conditions hereinafter provided in this Section, by filing an application for registration in such

form and containing such information and supporting documents as the Commission by rule shall prescribe, including the following: (a) An undertaking to comply and enforce compliance by its participants with the provisions of this Code, and any amendments thereto, and the implementing rules or regulations made or to be made thereunder, and the clearing agencys rules; (b) The organizational charts of the Exchange, its rules of procedure, and list of its officers and participants; (c) Copies of the clearing agencys rules. 42.2. No registration of a clearing agency shall be granted unless the rules of the clearing agency include provision for: (a) The expulsions, suspension, or disciplining of a participant for violations of this Code, or any other Act administered by the Commission, the rules, regulations, and orders thereunder, or the clearing agencys rules; (b) A fair procedure for the disciplining of participants, the denial of participation rights to any person seeking to be a participant, and the prohibition or limitation of any person from access to services offered by the clearing agency; (c) The equitable allocation of reasonable dues, fees, and other charges among participants; (d) Prevention of fraudulent and manipulative acts and practices, promotion of just and equitable principles of trade, and, in general, protection of investors and the public interest; (e) The transparent, prompt and accurate clearance and settlement of transactions in securities handled by the clearing agency; and (f) The establishment and oversight of a fund to guarantee the prompt and accurate clearance and settlement of transaction executed on an exchange, including a requirement that members each contribute an amount based on their and a relevant percentage of the daily exposure of the (4) largest trading brokers which adequately reflects trading risks undertaken or pursuant to another formula set forth in Commission rules or regulations or order, upon application: Provided, however, That a clearing agency engaged in the business of securities depository shall be exempt from this requirement. 42.3. In the case of an application filed pursuant to this section, the Commission shall grant registration if it is finds That the requirements of this code and the rules and regulations thereunder with respect to the applicant have been satisfied, and shall deny registration if it does not make such finding.

42.4. Upon appropriate application in accordance with the rules and regulations of the Commission and upon such terms as the Commission may deem necessary for the protection of investors, a clearing agency may withdraw its registration or suspend its operation or resume the same. Section 43. Uncertificated Securities. Notwithstanding Section 63 of the Corporation Code of the Philippines: 43.1. A corporation whose securities are registered pursuant to this Code or listed on securities exchange may: (a) If so resolved by its Board of Directors and agreed by a shareholder, investor or securities intermediary, issue shares to, or record the transfer of some or all its shares into the name of said shareholders, investors or, securities intermediary in the form of uncertified securities. The use of uncertified securities in these circumstances shall be without prejudice to the rights of the securities intermediary subsequently to require the corporation to issue a certificate in respect of any shares recorded in its name; and (b) If so provided in its articles of incorporation and by-laws, issue all of the shares of a particular class in the form of Uncertificated securities and subject to a condition that investors may not require the corporation to issue a certificate in respect of any shares recorded in their name. 43.2. The Commission by rule may allow other corporations to provide in their articles of incorporation and by-laws for the use of uncertificated securities. 43.3. Transfers of securities, including an uncertificated securities, may be validly made and consummated by appropriate book-entries in the securities intermediaries, or in the stock and transfer book held by the corporation or the stock transfer agent and such bookkeeping entries shall be binding on the parties to the transfer. A transfer under this subsection has the effect of the delivery of a security in bearer form or duly indorsed in blank representing the quantity or amount of security or right transferred, including the unrestricted negotiability of that security by reason of such delivery. However, transfer of uncertificated shares shall only be valid, so far as the corporation is concerned, when a transfer is recorded in the books of the corporation so as to show the names of the parties to the transfer and the number of shares transferred. However, nothing in this Code shall compliance by banking and other institutions under the supervision of the Bangko Sentral ng Pilipinas and their stockholders with the applicable ceilings on shareholding prescribed under pertinent banking laws and regulations.

Section 44. Evidentiary Value of Clearing Agency Record. The official records and book entries of a clearing agency shall constitute the best evidence of such transactions between clearing agency shall constitute the best between clearing agency and its participants or members clients to prove their rights, title and entitlement with respect to the book-entry security holdings of the participants or members held on behalf of the clients. However, the corporation shall not be bound by the foregoing transactions unless the corporate secretary is duly notified in such manner as the Commission may provide. Section 45. Pledging a Security or Interest Therein. In addition to other methods recognized by law, a pledge of, including an uncertificated security, is properly constituted and the instrument proving the right pledged shall be considered delivered to the creditor under Articles 2093 and 2095 of the Civil Code if a securities intermediary indicates by book entry that such security has been credited to a specially designated pledge account in favor of the pledgee. A pledge under this subsection has the effect of the delivery of a security in bearer form or duly indorsed in blank representing the quantity or amount of such security or right pledged. In the case of a registered clearing agency, the procedures by which, and the exact time at which, such book-entries are created shall be governed by the registered clearing agencys rules. However, the corporation shall not be bound by t he foregoing transactions unless the corporate secretary is duly notified in such manner as the Commission may provide. Section 46. Issuers Responsibility for Wrongful Transfer to Registered Clearing Agency. - The registration of a transfer of a security into the name of and by a registered clearing agency or its name of or by a registered clearing agency or its nominee shall be final and conclusive unless the clearing agency had notice of an adverse claim before the registration was made. The above provisions which the claimant may have against the issuer for wrongful registration in such circumstances. Section 47. Power of the Commission With Respect to Securities Ownership. The Commission is authorize, having due regard to the public interest and the protection of investors, to promulgate rules and regulations which: 47.1. Validate the transfer of securities by book-entries rather than the delivery of physical certificates; 47.2. Establish when a person acquires a security or an interest therein and when delivery of a security to a purchaser occurs; 47.3. Establish which records constitute the best evidence of a persons interests in a security and the effect of any errors in electronic records of ownership;

47.4. Codify the rights of investors who choose to hold their securities indirectly through a registered clearing agency and/ or other securities intermediaries; 47.5. Codify the duties of securities intermediaries (including clearing agencies) who hold securities on behalf of investors; and 47.6 Give first priority to any claims of a registered clearing agency against a participant arising from a failure by the participant to meet its obligations under the clearing agencys rules in respect of the clearing and settlement of transactions in securities, in a dissolution of the participant, and any such rules and regulation shall bind the issuers of the securities, investors in the securities, any third parties with interests in the securities, and the creditors of a participant of a registered clearing agency.

CHAPTER XII MARGIN AND CREDIT Section 48. Margin Requirements. 48.1. For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Commission, in accordance with the credit and monetary policies that may be promulgated from time to time by the Monetary Board of the Bangko Sentral ng Pilipinas, shall prescribed rules and regulations with respect to the amount of credit that may be extended on any security. For the extension of credit, such rules and regulations shall be based upon the following standard: An amount not greater than the whichever is the higher of (a) Sixty-five per centum (65%) of the current market price of the security, or (b) One hundred per centum (100%) of the lowest market price of the security during the preceding thirty-six (36) calendar months, but not more than seventyfive per centum (75%) of the current market price. However, the Monetary Board may increase or decrease the above percentages, in order to achieve the objectives of the Government with due regard for promotion of the economy and prevention of the use of excessive credit. Such rules and regulations may make appropriate provision with respect to the carrying of undermargined accounts for limited periods and under specified conditions; the withdrawal of funds or securities; the transfer of accounts from one lender to another; special or different margin requirements for delayed deliveries, short sales, arbitrage transactions, and securities to which letter (b) of

the second paragraph of this subsection does not apply; the methods to be used in calculating loans, and margins and market prices; and similar administrative adjustments and details. 48.2. No member of an Exchange or broker or dealer shall, directly or indirectly, extend or maintain credit is extended and maintain credit or arrange for the extension or maintenance of credit to or for any customer: (a) On any security unless such credit is extended and maintained in accordance with the rules and regulations which the Commission shall prescribe under this Section including rules setting credit in relation to net capital of such member, broker or dealer; and (b) Without collateral or any collateral other than securities, except (I) to maintain a credit initially extended in conformity with rules and regulations of the Commission and (ii) in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of paragraph (a) of this subsection. 48.3 Any person not subject to Subsection 48.2 hereof shall extend or maintain credit or arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, only in accordance with such rules and regulations as the Commission shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this Section.. Such rules and regulations may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by Subsection 48.2 and the rules and regulations thereunder. This subsection and the rules and regulations thereunder shall not apply: (a) To a credit extension made by a person not in the ordinary course of business; (b) to a loan to a dealer to aid in the financing of the distribution of securities to customers not through the medium of an Exchange; or (c) To such other credit extension as the Commission shall exempt from the operation of this subsection and the rules and regulations thereunder upon specified terms and conditions for stated period. Section 49. Restrictions on Borrowings by Members, Brokers, and Dealers. It shall be unlawful for any registered broker or dealer, or member of an Exchange, directly or indirectly; 49.1. To permit in the ordinary course of business as a broker or dealer his aggregate indebtedness including customers credit balances, to exceed such percenta ge of the net capital (exclusive of fixed assets and value of Exchange membership) employed in

the business, but not exceeding in any case to thousand percentum (2,000%), as the Commission may be rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors. 49.2. To pledge, mortgage, or otherwise encumber or arrange for the pledge, mortgage, or encumbrance of any security carried for the account of any customer under circumstances: (a) That will permit the commingling of his securities, without his written consent, with the securities of any customer; (b) That will permit such securities to be commingled with the securities of any person other than a bona fide customer; or (c) that will permit such securities to be pledged, mortgaged or encumbered, or subjected to any lien or claim of the pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of such securities. However, the Commission, having due regard to the protection of investors, may, by rules and regulations, allow certain transactions that may otherwise be prohibited under this subsection. 49.3. To lend or arrange for the lending of any security carried for the account of any customer without the written consent of such customer or in contravention of such rules and regulations as the Commission shall prescribe. Section 50. Enforcement of Margin Requirement and Restrictions on Borrowing. To prevent indirect violations of the margin requirements under Section 48, the broker or dealer shall require the customer in non-margin transactions to pay the price of the security purchased for his account within such period as the Commission may prescribe, which shall in no case exceed the prescribed settlement date. Otherwise, the broker shall sell the security purchased starting on the next trading day but not beyond ten (10) trading days following the last day for the customer to pay such purchase price, unless such sale cannot be effected within said period for justifiable reasons. The sale shall be without prejudice to the right of the broker or dealer to recover any deficiency from the customer. To prevent indirect violation of the restrictions on borrowing under Section 49, the broker shall, unless otherwise directed by the customer, pay the net sales price of the securities sold for a customer within the same period as above prescribed by the Commission: Provided, That the customer shall be required to deliver the instruments evidencing the securities as a condition for such payment upon demand by the broker. CHAPTER XIII GENERAL PROVISIONS Section 51. Liabilities of Controlling Persons, Aider and Abettor and Other Secondary Liability. 51.1. Every person who, by or through stock ownership,

agency, or otherwise, or in connection with an agreement or understanding with one or more other persons, controls any person liable under this Code or the rules or regulations of the Commission thereunder, shall also be liable jointly and severally with and to the same extent as such controlled persons to any person to whom such controlled person is liable, unless the controlling person proves that, despite the exercise of due diligence on his part, he has no knowledge of the existence of the facts by reason of which the liability of the controlled person is alleged to exist. 51.2. It shall be unlawful for any person, directly, or indirectly, to do any act or thing which it would be unlawful for such person to do under the provisions of this Code or any rule or regulation thereunder. 51.2. It shall be unlawful for any director or officer of, or any owner of any securities issued by, any issuer required to file any document, report or other information under this Code or any rule or regulation of the Commission thereunder, without just cause, to hinder, delay or obstruct the making or filing of any such document, report, or information. 51.3. It shall be unlawful for any person to aid, abet, counsel, command, induce or procure any violation of this Code, or any rule, regulation or order of the Commission thereunder. 52.4. Every person who substantially assists the act or omission of any person primarily liable under Sections 57, 58, 59 and 60 of this Code, with knowledge or in reckless disregard that such act or omission is wrongful, shall be jointly and severally liable as an aider and abettor for damages resulting from the conduct of the person primarily liable: Provided, however, That an aider and abettor shall be liable only to the extent of his relative contribution in causing such damages in comparison to that of the person primarily liable, or the extent to which the aider and abettor was unjustly enriched thereby, whichever is greater. Section 52. Accounts and Records, Reports, Examination of Exchanges, members, and Others. 52.1. Every registered Exchange, broker or dealer, transfer agent, clearing agency, securities association, and other self-regulatory organization, and every other person required to register under this Code, shall make, keep and preserve for such periods, records, furnish such copies thereof, and make such reports, as the Commission by its rules and regulations may prescribe. Such accounts, correspondence, memoranda, papers, books, and other records shall be subject at any time to such reasonable periodic, special or other examinations by representatives of the Commission as the Commission may deem necessary or appropriate in the public interest of for the protection of investors.

52.2. Any brother, dealer or other person extending credit, who is subject to the rules and regulations prescribed by the Commission pursuant to this Code, shall make such reports to the Commission as may be necessary or appropriate to enable it to perform the functions conferred upon it by this Code. 52.3. For purposes of this Section, the term "records refers to accounts, correspondence, memoranda, tapes, discs, papers, books and other documents or transcribed information of any type, whether written or electronic in character. Section 53. Investigations, Injunctions and Prosecution of Offenses. 53.1. The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency, other self-regulatory organization, and may require or permit any person to file with it a statement in writing, under oath or otherwise, as the Commission shall determine, as to all facts and circumstances concerning the matter to be investigated. The Commission may publish information concerning any such violations, and to investigate any fact, condition, practice or matter which it may deem necessary or proper to aid in the enforcement of the provisions of this Code, in the prescribing of rules and regulations thereunder, or in securing information to serve as a basis for recommending further legislation concerning the matters to which this Code relates: Provided, however, That any person requested or subpoenaed to produce documents or testify in any investigation shall simultaneously be notified in writing of the purpose of such investigation: Provided, further, That all criminal complaints for violations of this Code, and the implementing rules and regulations enforced or administered by the Commission shall be referred to the Department of Justice for preliminary investigation and prosecution before the proper court: Provided, furthermore, That in instances where the law allows independent civil or criminal proceedings of violations arising from the same act, the Commission shall take appropriate action to implement the same: provided, finally, That the investigation, prosecution, and trial of such cases shall be given priority. 53.2. For the purpose of any such investigation, or any other proceeding under this Code, the Commission or any officer designated by it is empowered to administer oaths and affirmations, subpoena witnesses, compel attendance, take evidence, require the production of any book, paper, correspondence, memorandum, or other record which the Commission deems relevant or material to the inquiry, and to perform such other acts necessary in the conduct of such investigation or proceedings.

53.3. Whenever it shall appear to the Commission that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency or other self-regulatory organization, it may issue an order to such person to desist from committing such act or practice: Provided, however, That the Commission shall not charge any person with violation of the rules of an Exchange or other self-regulatory organization unless it appears to the Commission that such Exchange or other self-regulatory organization is unable or unwilling to take action against such person. After finding that such person has engaged in any such act or practice and that there is a reasonable likelihood of continuing, further or future violations by such person, the Commission may issue exparte a cease and desist order for a maximum period of ten (10) days, enjoining the violation and compelling compliance with such provision. The Commission may transmit such evidence as may be available concerning any violation of any provision of this Code, or any rule, regulation or order thereunder, to the Department of Justice, which may institute the appropriate criminal proceedings under this Code. 53.4. Any person who, within his power but without cause, fails or refuses to comply with any lawful order, decision or subpoena issued by the Commission under Subsection 53.2 or Subsection 53.3 or Section 64 of this Code, shall after due notice and hearing, be guilty of contempt of the Commission. Such person shall be fined in such reasonable amount as the Commission may determine, or when such failure or refusal is a clear and open defiance of the Commissions order, decision or subpoena, shall be detained under an arrest order issued by the Commission, until such order, decision or subpoena is complied with. Section 54. Administrative Sanctions. 54.1. If, after due notice and hearing, the Commission finds that: (a) There is a violation of this Code, its rule, or its orders; (b) Any registered broker or dealer, associated person thereof has failed reasonably to supervise, with a view to preventing violations, another person subject to supervision who commits any such violation; (c) Any registrant or other person has, in a registration statement or in other reports, applications, accounts, records or documents required by law or rules to be filed with the Commission, made any untrue statement of a material fact, or omitted to state any material fact required to be stated their or necessary to make the statements therein not misleading; or, in the case of an underwriter, has failed to conduct an inquiry with reasonable diligence to insure that a registration statement is accurate and complete in all material respects; or (d) Any person has refused to permit any lawful examinations into its affairs, it shall, in its discretion, and subject only to the limitations hereinafter prescribed,

impose any or all of the following sanctions as may be appropriate in light of the facts and circumstances: (i) Suspension, or revocation of any registration for the offering of securities; (ii) A fine of no less than Ten thousand pesos (P10,000.00) nor more than One million pesos (P1,000,000.00) plus not more than Two thousand pesos (P2,000.00) for each day of continuing violation; (iii) In the case of a violation of Sections 19.2, 20, 24, 26 and 27, disqualification from being an officer, member of the Board of Directors, or person performing similar functions, of an issuer required to file reports under Section 17 of this Code or any other act, rule or regulation administered by the Commission; (iv) In the case of a violation of Section 34, a fine of no more than three (3) times the profit gained or loss avoided as result of the purchase, sale or communication proscribed by such Section, and (v) Other penalties within the power of the Commission to impose. 54.2. The imposition of the foregoing administrative sanctions shall be without prejudice to the filing of criminal charges against the individuals responsible for the violation. 54.3. The Commission shall have the power to issue writs of execution to enforce the provisions of the Section and to enforce payment of the fees and other dues collectible under this Code. Section 55. Settlement Offers. 55.1. At any time, during an investigation or proceeding under this Code, parties being investigated and/or charged may propose in writing an offer of settlement with the Commission. 55.2. Upon receipt of such offer of settlement, the Commission may consider the offer based on timing, the nature of the investigation or proceeding, and the public interest. 55.3. The Commission may only agree to a settlement offer based on its findings that such settlement is in the public interest. Any agreement to settle shall have no legal effect until publicly disclosed. Such decision may be made without a determination of guilt on the part of the person making the offer. 55.4. The Commission shall adopt rules and procedures governing the filing, review, withdrawal, form of rejection and acceptance of such offers. Section 56. Civil Liabilities on Account of False Registration Statement. 56.1. Any person acquiring a security, the registration statement of which or any part thereof contains on its effectivity an untrue statement of a material fact or omits

to state a material fact required to be stated therein or necessary to make such statements not misleading, and who suffers damage, may sue and recover damages from the following enumerated persons, unless it is proved that at the time of such acquisition he knew of such untrue statement or omission: (a) The issuer and every person who signed the registration statement: (b) Every person who was a director of, or any other person performing similar functions, or a partner in, the issuer at the time of the filing of the registration statement or any part, supplement or amendment thereof with respect to which his liability is asserted; (c) Every person who is named in the registration statement as being or about to become a director of, or a person performing similar functions, or a partner in, the issuer and whose written consent thereto is filed with the registration statement; (d) Every auditor or auditing firm named as having certified any financial statements used in connection with the registration statement or prospectus. (e) Every person who, with his written consent, which shall be filed with the registration statement, has been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement, report, or valuation, which purports to have been prepared or certified by him. (f) Every selling shareholder who contributed to and certified as to the accuracy of a portion of the registration statement, with respect to that portion of the registration statement which purports to have been contributed by him. (g) Every underwriter with respect to such security. 56.2. If the person who acquired the security did so after the issuer has made generally available to its security holders an income statement covering a period of at least twelve (12) months beginning from the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such income statement, but such reliance may be established without proof of the reading of the registration statement by such person. Section 57. Civil Liabilities Arising in Connection With Prospectus, Communications and Reports. 57.1. Any person who: (a) Offers to sell or sells a security in violation of Chapter III, or

(b) Offers to sell or sells a security, whether or not exempted by the provisions of this Code, by the use of any means or instruments of transportation or communication, by means of a prospectus or other written or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall fail in the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security. 57.2. Any person who shall make or cause to be made any statement in any report, or document filed pursuant to this Code or any rule or regulation thereunder, which statement as at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, shall be liable to any person who, not knowing that such statement was false or misleading, and relying upon such statement shall have purchased or sold a security at a price which was affected by such statement, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading. Section 58. Civil Liability of Fraud in Connection with Securities Transactions. Any person who engages in any act or transaction in violation of Sections 19.2, 20 or 26, or any rule or regulation of the Commission thereunder, shall be liable to any other person who purchases or sells any security, grants or refuses to grant any proxy, consent or authorization, or accepts or declines an invitation for tender of a security, as the case may be, for the damages sustained by such other person as a result of such act or transaction. Section 59. Civil Liability for Manipulation of Security Prices. Any person who willfully participates in any act or transaction in violation of Section 24 shall be liable to any person who shall purchase or sell any security at a price which was affected by such act or transaction, and the person so injured may sue to recover the damages sustained as a result of such act or transaction. Section 60. Civil Liability with Respect to Commodity Futures Contracts and Preneed Plans. 60.1. Any person who engages in any act or transactions in willful violation of any rule or regulation promulgated by the Commission under Section 11 or 16, which the Commission denominates at the time of issuance as intended

to prohibit fraud in the offer and sale of pre-need plans or to prohibit fraud, manipulation, fictitious transactions, undue speculation, or other unfair or abusive practices with respect to commodity future contracts, shall be liable to any other person sustaining damages as a result of such act or transaction. 60.2. As to each such rule or regulation so denominated, the Commission by rule shall prescribe the elements of proof required for recovery and any limitations on the amount of damages that may be imposed. Section 61. Civil Liability on Account of Insider Trading. 61.1. Any insider who violates Subsection 27.1 and any person in the case of a tender offer who violates Subsection 27.4 (a)(I), or any rule or regulation thereunder, by purchasing or selling a security while in possession of material information not generally available to the public, shall be liable in a suit brought by any investor who, contemporaneously with the purchase or sale of securities that is the subject of the violation, purchased or sold securities of the same class unless such insider, or such person in the case of a tender offer, proves that such investor knew the information or would have purchased or sold at the same price regardless of disclosure of the information to him. 61.2. An insider who violates Subsection 27.3 or any person in the case of a tender offer who violates Subsection 27.4 (a), or any rule or regulation thereunder, by communicating material nonpublic information, shall be jointly and severally liable under Subsection 61.1 with, and to the same extent as, the insider, or person in the case of a tender offer, to whom the communication was directed and who is liable under Subsection 61.1 by reason of his purchase or sale of a security. Section 62. Limitation of Actions. 62.1. No action shall be maintained to enforce any liability created under Section 56 or 57 of this Code unless brought within two (2) years after the discovery of the untrue statement or the omission, or, if the action is to enforce a liability created under Subsection 57.1 (a), unless, brought within two (2) yeas after the violation upon which it is based. In no event shall an such action be brought to enforce a liability created under Section 56 or Subsection 57.1 (a) more than five (5) years after the security was bona fide offered to the public, or under Subsection 57.1 (b0 more than five (5) years after the sale. 62.2. No action shall be maintained to enforce any liability created under any other provision of this Code unless brought within two (20 years after the discovery of the facts constituting the cause of action and within five (5) years after such cause of action accrued. Section 63. Amount of Damages to be Awarded. 63.1. All suits to recover damages pursuant to Sections 56, 57, 58, 59, 60 and 61 shall be brought before the Regional Trial Court, which shall have exclusive jurisdiction to hear and decide such suits. The

Court is hereby authorized to award damages in an amount not exceeding triple the amount of the transaction plus actual damages. Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or wantonness in the violation of this Code or the rules and regulations promulgated thereunder. The Court is also authorized to award attorneys fees not exceeding thirty percentum (30%) of the award. 63.2. The persons specified in Sections 56, 57, 58, 59, 60 and 61 hereof shall be jointly and severally liable for the payment of damages. However, any person who becomes liable for the payment of such damages may recover contribution from any other person who, if sued separately, would have been liable to make the same payment, unless the former was guilty of fraudulent representation and the latter was not. 63.3. Notwithstanding any provision of law to the contrary, all persons, including the issuer, held liable under the provisions of Sections 56, 57, 58, 59, 60 and 61 shall contribute equally to the total liability adjudged herein. In no case shall the principal stockholders, directors and other officers of the issuer or persons occupying similar positions therein, recover their contribution to the liability from the issuer. However, the right of the issuer to recover from the guilty parties the amount it has contributed under this Section shall not be prejudiced. Section 64. Cease and Desist Order. 64.1. The Commission, after proper investigation or verification, motu proprio or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public. 64.2. Until the Commission issue a cease and desist order, the fact that an investigation has been initiated or that a complaint has been filed, including the contents of the complaint, shall be confidential. Upon issuance of a cease and desist order, the Commission shall make public such order and a copy thereof shall be immediately furnished to each person subject to the order. 64.3. Any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order, file a formal request for a lifting thereof. Said request shall be set for hearing by the Commission not later than fifteen (15) days from its filing and the resolution thereof shall be made not later than ten (10) days from the termination of the hearing. If the Commission fails to resolve the

request within the time herein prescribed, the cease and desist order shall automatically be lifted. Section 65. Substituted Service Upon the Commission. Service of summons or other process shall be made upon the Commission in actions or legal proceedings against an issuer or any person liable under this Code who is not domiciled in the Philippines. Upon receipt by the Commission of such summons, the Commission shall within ten (10) days thereafter, transmit by registered mail a copy of such summons and the complaint or other legal process to such issuer or person at his last known address or principal office. The sending thereof by the Commission, the expenses for which shall be advanced by the party at whose instance it is made, shall complete such service. Section 66. Revelation of Information Filed with the Commission. 66.1. All information filed with the commission in compliance with the requirements of this Code shall be made available to any member of the general public, upon request, in the premises and during regular office hours of the Commission, except as set forth in this Section. 66.2. Nothing in this Code shall be construed to require, or to authorize the Commission to require, the revealing of trade secrets or processes in any application, report, or document filed with the Commission. 66.3. Any person filing any such application, report or document may make written objection to the public disclosure of information contained therein, stating the grounds for such objection, and the Commission may hear objections as it deems necessary. The Commission may, in such cases, make available to the public the information contained in any such application, report, or document only when a disclosure of such information is required in the public interest or for the protection of investors; and copies of information so made available may be furnished to any person having a legitimate interest therein at such reasonable charge and under such reasonable limitations as the Commission may prescribe. 66.4. It shall be unlawful for any member, officer, or employee of the Commission to disclose to any person other than a member, officer or employee of the Commission or to use for personal benefit, any information contained in any application, report, or document filed with the Commission which is not made available to the public pursuant to Subsection 66.3. 66.5. Notwithstanding anything in Subsection 66.4 to the contrary, on request from a foreign enforcement authority of any country whose laws grant reciprocal assistance as herein provided, the Commission may provide assistance in accordance with this subsection, including the disclosure of any information filed with or transmitted to the Commission. If the requesting authority states that it is conducting an investigation

which it deems necessary to determine whether any person has violated, is violating, or is about to violate any laws relating to securities or commodities matters that the requesting authority administers or enforces. Such assistance may be provided without regard to whether the facts stated in the request would also constitute a violation of law of the Philippines. Section 67. Effect of action of Commission and Unlawful Representations with Respect Thereto. 67.1. No action or failure to act by the Commission in the administration of this Code shall be construed to mean that the Commission has in any way passed upon the merits of or given approval to any security or any transactions or transactions therein, nor shall such action or failure to act with regard to any statement or report filed with or examined by the Commission pursuant to this Code or the rules and regulations thereunder to be deemed a finding by the Commission that such statements or report is true and accurate on its face or that it is not false or misleading. It shall be unlawful to make, or cause to be made, to any prospective purchaser or seller or a security any representation that any such action or failure to act by the Commission is to be so construed or has such effect. 67.2. Nothing contained in Subsection 67.1 shall, however, be construed as an exemption from liability of an employee or officer of the Commission for any nonfeasance, misfeasance or malfeasance in the discharge of his official duties. Section 68. Special Accounting Rules. The Commission shall have the authority to make, amend, and rescind such accounting rules and regulations as may be necessary to carry out the provisions of this Code, including rules and regulations as may be necessary to carry out the provisions of this Code, including rules and regulations governing registration statements and prospectuses for various classes of securities and issuers, and defining accounting, technical and trade terms used in this Code. Among other things, the Commission may prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and income statement, and the methods to be followed in the preparation of accounts, appraisal or valuation of assets and liabilities, determination of depreciation and depletion, differentiation of recurring and non-recurring income, differentiation of investment and operating income, and in the preparation, where the Commission deems it necessary or desirable of consolidated balance sheets or income accounts of any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer.

Section 69. Effect on Existing Law. The rights and remedies provided by this Code shall be in addition to any and all order rights and remedies that may now exist. However, except as provided in Section 56 and 63 hereof, no person permitted to maintain a suit for damages under the provisions of this Code shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of: Provided, That exemplary damages may be awarded in cases of bad faith, fraud, malevolence or wantonness in the violation of this Code or the rules and regulations promulgated thereunder. Section 70. Judicial Review of Commission Orders. Any person aggrieved by an order of the Commission may appeal the order to the Court of Appeals by petition for review in accordance with the pertinent provisions of the Rules of Court. Section 71. Validity of Contracts. 71.1. Any condition, stipulation, provision binding any person to waive compliance with any provision of this Code or of any rule or regulation thereunder, or of any rule of an Exchange required thereby, as well as the waiver itself, shall be void. 71.2. Every contract made in violation of any provision of this Code or of any rule or regulation thereunder, and every contract, including any contract for listing a security or an Exchange heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of, any provision of this Code, or any rule or regulation thereunder, shall be void: (a) As regards the rights of any person who, in violation of any such provision, rule or regulation, shall have made or engaged in the performance of any such contract, and (b) As regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision, rule or regulation. 71.3. Nothing in this Code shall be construed: (a) To affect the validity of any loan or extension of credit made or of any lien created prior or subsequent to the effectivity of this Code, unless at the time of the making of such loan or extension of credit or the creating of such lien, the person making such loan or extension of credit or acquiring such lien shall have actual knowledge of the facts by reason of which the making of such loan or extension of credit or the acquisition of such lien is a violation of the provisions of this Code or any rules or regulations thereunder, or (b) To afford a defense to the collection of any debt, obligation or the enforcement of any lien by any person who shall have acquired such debt, obligation or lien in good

faith for value and without actual knowledge of the violation of any provision of this Code or any rule or regulation thereunder affecting the legality of such debt, obligation or lien. Section 72. Rules and Regulations; Effectivity. 72.1. This Code shall be selfexecutory. To effect the provisions and purposes of this Code, the Commission may issue, amend, and rescind such rules and regulations and orders necessary or appropriate, including rules and regulations defining accounting, technical, and trade terms used in this Code, and prescribing the form or forms in which information required in registration statements, applications, and reports to the Commission shall be set forth. For purposes of its rules or regulations, the Commission may classify persons, securities, and other matters within its jurisdiction, prescribe different requirements for different classes of persons, securities, or matters, and by rule or order, conditionally or unconditionally exempt any person, security, or transaction, or class or classes of persons, securities or transactions, from any or all provisions of this Code. Failure on the part of the Commission to issue rules and regulations shall not in any manner affect the self-executory nature of this Code. 72.2. The Commission shall promulgate rules and regulations providing for reporting, disclosure and the prevention of fraudulent, deceptive or manipulative practices in connection with the purchase by an issuer, by tender offer or otherwise, of and equity security of a class issued by it that satisfies the requirements of Subsection 17.2. such rules and regulations may require such issuer to provide holders of equity securities of such dates with such information relating to the reasons for such purchase, the source of funds, the number of shares to be purchased, the price to be paid for such securities, the method of purchase and such additional information as the Commission deems necessary or appropriate in the public interest or for the protection of investors, or which the Commission deems to be material to a determination by holders whether such security should be sold. 72.3. For the purpose of Subsection 72.2, a purchase by or for the issuer or any person controlling, controlled by, or under common control with the issuer, or a purchase subject to the control of the issuer or any such person, shall be deemed to be a purchased by the issuer. The commission shall have the power to make rules and regulations implementing this subsection, including exemptive rules and regulations covering situations in which the Commission deems it unnecessary or inappropriate that a purchase of the type described in this subsection shall be

deemed to be a purchase by the issuer for the purpose of some or all of the provisions of Subsection 72.2. 72.4. The rules and regulations promulgated by the Commission shall be published in two (20 newspapers or general circulation in the Philippines, and unless otherwise prescribed by the Commission, the same shall be effective fifteen (15) days after the date of the last publication. Section 73. Penalties. Any person who violates any of the provisions of this Code, or the rules and regulations promulgated by the Commission under authority thereof, or any person who, in a registration statement filed under this Code, makes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall, upon conviction, suffer a fine of not less than Fifty thousand pesos (P50,000.00) nor more than Five million pesos (P5,000,000.00) or imprisonment of not less than seven (7) years nor more than twenty-one (21) years, or both in the discretion of the court. If the offender is a corporation, partnership or association or other juridical entity, the penalty may in the discretion of the court be imposed upon such juridical entity and upon the officer or officers of the corporation, partnership, association or entity responsible for the violation, and if such officer is an alien, he shall in addition to the penalties prescribed, be deported without further proceedings after service of sentence. Section 74. Transitory Provisions. The Commission, as organized under existing laws, shall continue to exist and exercise its powers, functions and duties under such laws and this Code: Provided, That until otherwise mandated by a subsequent law, the Commission shall continue to regulate and supervise commodity futures contracts as provided in Section 11 and pre-need plans and the pre-need industry as provided in Section 16 of this Code. All further requirements herein shall be complied with upon approval of this Code: Provided, however, That compliance may be deferred for such reasonable time as the Commission may determine but not to exceed one (1) year from approval of this Code: Provided, further, That securities which are being offered at the time of effectivity of this Code pursuant to an effective registration and permit, may continue to be offered and sold in accordance with the provisions of the Revised Securities Act in effect immediately prior to approval of this Code. All unexpended funds for the calendar year, properties, equipment and records of the Securities and Exchange Commission are hereby retained by the Commission as reorganized under this Code and the amount of Two hundred million pesos

(P200,000,000.00) or such amount necessary to carry out the reorganization provided in this Code is hereby appropriated. All employees of the Commission who voluntarily retire or are separated from the service with the Commission and whose retirement or separation has been approved by the Commission, shall be paid retirement or separation benefits and other entitlement granted under existing laws. Section 75. Partial Use of Income. To carry out the purposes of this Code, the Commission is hereby authorized, in addition to its annual budget, to retain and utilize an amount equal to One hundred million pesos (P100,000,000.00) from its income. The use of such additional amount shall be subject to the auditing requirements, standards and procedures under existing laws. Section 76. Repealing Clause. The Revised Securities Act (Batas Pambansa Blg. 178), as amended, are hereby repealed. All other laws, orders, rules and regulations, or parts thereof, inconsistent with any provision of this Code are hereby repealed or modified accordingly. Section 77. Separability Clause. if any portion or provision of this Code is declared unconstitutional or invalid, the other portions or provisions hereof, which are not affected thereby shall continue in full force and effect. Section 78. Effectivity. This Code shall take effect fifteen (15) days after its publication in the Official Gazette or in two (2) newspapers of general circulation. Approved: July 19, 2000

Re: PROPOSED INTERIM RULES OF PROCEDURE GOVERNING INTRA-CORPORATE CONTROVERSIES UNDER R. A. NO. 8799 [A.M. No. 01-2-04-SC] RULE 1

GENERAL PROVISIONS SECTION 1. (a) Cases covered. These Rules shall govern the procedure to be observed in civil cases involving the following: 1. Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association; 2. Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or association of which they are stockholders, members, or associates, respectively; 3. Controversies in the election or appointment of directors, trustees, officers, or managers of corporations, partnerships, or associations; 4. Derivative suits; and 5. Inspection of corporate books. (b) prohibition against nuisance and harassment suits. - Nuisance and harassment suits are prohibited. In determining whether a suit is a nuisance or harassment suit, the court shall consider, among others, the following: 1. The extent of the shareholding or interest of the initiating stockholder or member; 2. Subject matter of the suit; 3. Legal and factual basis of the complaint; 4. Availability of appraisal rights for the act or acts complained of; and 5. Prejudice or damage to the corporation, partnership, or association in relation to the relief sought. In case of nuisance or harassment suits, the court may, moto proprio or upon motion, forthwith dismiss the case. SEC. 2. Suppletory application of the Rules of Court. The Rules of Court, in so far as they may be applicable and are not inconsistent with these Rules, are hereby adopted to form an integral part of these Rules. SEC. 3. Construction. These Rules shall be liberally construed in order to promote their objective of securing a just, summary, speedy and inexpensive determination of every action or proceeding.

SEC. 4. Executory nature of decisions and orders. All decisions and orders issued under these Rules shall immediately be executory. No appeal or petition taken therefrom shall stay the enforcement or implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall not be subject to appeal. SEC. 5. Venue. All actions covered by these Rules shall be commenced and tried in the Regional Trial Court which has jurisdiction over the principal office of the corporation, partnership, or association concerned. Where the principal office of the corporation, partnership or association is registered in the Securities and Exchange Commission as Metro Manila, the action must be filed in the city or municipality where the head office is located. SEC. 6. Service of pleadings. When so authorized by the court, any pleading and/or document required by these Rules may be filed with the court and/or served upon the other parties by facsimile transmission (tax) or electronic mail (email. In such cases, the date of transmission shall be deemed to be prima facie the date of service. SEC. 7. Signing of pleadings, motions and other papers. Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in the attorneys individual name, whose address shall be stated. A party who is not represented by an attorney shall sign the pleading, motion, or other paper and state his address. The signature of an attorney or party constitutes a certification by the signer that he has read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing jurisprudence; and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. If a pleading, motion, or other paper is not signed, it shall be stricken off the record unless it is promptly signed by the pleader or movant, after he is notified of the omission. SEC. 8. Prohibited pleadings. The following pleadings are prohibited: 1. Motion to dismiss; 2. Motion for a bill of particulars; 3. Motion for new trial, or for reconsideration of judgment or order, or for reopening of trial;

4. Motion for extension of time to file pleadings, affidavits or any other paper, except those filed due to clearly compelling reasons. Such motion must be verified and under oath; and 5. Motion for postponement and other motions of similar intent, except those filed due to clearly compelling reasons. Such motion must be verified and under oath. SEC. 9. Assignment of cases. All cases filed under these Rules shall be tried by judges designated by the Supreme Court to hear and decide cases transferred from the Securities and Exchange Commission to the Regional Trial Courts and filed directly with said courts pursuant to Republic Act No. 8799, otherwise known as the Securities and Regulation Cod RULE 2 COMMENCEMENT OF ACTION AND PLEADINGS SECTION 1. Commencement of action. An action under these Rules is commenced by the filing of a verified complaint with the proper Regional Trial Court. SEC. 2. Pleadings allowed. The only pleadings allowed to be filed under these Rules are the complaint, answer, compulsory counterclaims or cross-claims pleaded in the answer, and the answer to the counterclaims or cross-claims. SEC. 3. Verification. The complaint and the answer shall be verified by an affidavit stating that the affiant has read the pleading and the allegations therein are true and correct based on his own personal knowledge or on authentic records. SEC. 4. Complaint. The complaint shall state or contain: 1. the names, addresses, and other relevant personal or juridical circumstances of the parties; 2. all facts material and relevant to the plaintiffs cause or causes of action, which shall be supported by affidavits of the plaintiff or his witnesses and copies of documentary and other evidence supportive of such cause or causes of action; 3. the law, rule, or regulation relied upon, violated, or sought to be enforced; 4. a certification that (a) the plaintiff has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency, and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court; and

5. the relief sought. SEC. 5. Summons. The summons and the complaint shall be served together not later than five (5) days from the date of filing of the complaint. a. Service upon domestic private juridical entities. If the defendant is a domestic corporation, service shall be deemed adequate if made upon any of the statutory or corporate officers as fixed by the by-laws or their respective secretaries. If the defendant is a partnership, service shall be deemed adequate if made upon any of the managing or general partners or upon their respective secretaries. If the defendant is an association, service shall be deemed adequate if made upon any of its officers or their respective secretaries. b. Service upon foreign private juridical entity. When the defendant is a foreign private juridical entity which is transacting or has transacted business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. SEC. 6. Answer. The defendant shall file his answer to the complaint, serving a copy thereof on the plaintiff, within fifteen (15) days from service of summons. In the answer, the defendant shall: 1. Specify each material allegation of fact the truth of which he admits; 2. Specify each material allegation of fact the truth of which he does not admit. Where the defendant desires to deny only a part of an averment, he shall specify so much of it as true and material and shall deny only the remainder; 3. Specify each material allegation of fact as to which truth he has no knowledge or information sufficient to form a belief, and this shall have the effect of a denial; 4. State the defenses, including grounds for a motion to dismiss under the Rules of Court; 5. State the law, rule, or regulation relied upon; 6. Address each of the causes of action stated in the complaint; 7. State the facts upon which he relies for his defense, including affidavits of witnesses and copies of documentary and other evidence supportive of such cause or causes of action; 8. State any compulsory counterclaim/s and cross-claim/s; and 9. State the relief sought.

The answer to counterclaims or cross-claims shall be filed within ten (10) days from service of the answer in which they are pleaded. SEC. 7. Effect of failure to answer. If the defendant fails to answer within the period above provided, he shall be considered in default. Upon motion or motu proprio, the court shall render judgment either dismissing the complaint or granting the relief prayed for as the records may warrant. In no case shall the court award a relief beyond or different from that prayed for. SEC. 8. Affidavits, documentary and other evidence. Affidavits shall be based on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify on the matters stated therein. The affidavits shall be in question and answer form, and shall comply with the rules on admissibility of evidence. Affidavits of witnesses as well as documentary and other evidence shall be attached to the appropriate pleading; Provided, however, that affidavits, documentary and other evidence not so submitted may be attached to the pre-trial brief required under these Rules. Affidavits and other evidence not so submitted shall not be admitted in evidence, except in the following cases: 1. Testimony of unwilling, hostile, or adverse party witnesses. A witness is presumed prima facie hostile if he fails or refuses to execute an affidavit after a written request therefor; 2. If the failure to submit the evidence is for meritorious and compelling reasons; and 3. Newly discovered evidence. In case of (2) and (3) above, the affidavit and evidence must be submitted not later than five (5) days prior to its introduction in evidence. RULE 3 MODES OF DISCOVERY SECTION 1. In general. A party can only avail of any of the modes of discovery not later than fifteen (15) days from the joinder of issues. SEC. 2. Objections. Any mode of discovery such as interrogatories, request for admission, production or inspection of documents or things, may be objected to within ten (10) days from receipt of the discovery device and only on the ground that the matter requested is patently incompetent, immaterial, irrelevant or privileged in nature. The court shall rule on the objections not later than fifteen (15) days from the filing thereof.

SEC. 3. Compliance. Compliance with any mode of discovery shall be made within ten (10) days from receipt of the discovery device, or if there are objections, from receipt of the ruling of the court. SEC. 4. Sanctions. The sanctions prescribed in the Rules of Court for failure to avail of, or refusal to comply with, the modes of discovery shall apply. In addition, the court may, upon motion, declare a party non-suited or as in default, as the case may be, if the refusal to comply with a mode of discovery is patently unjustified. RULE 4 PRE-TRIAL SECTION 1. Pre-trial conference; mandatory nature. Within five (5) days after the period for availment of, and compliance with, the modes of discovery prescribed in Rule 3 hereof, whichever comes later, the court shall issue and serve an order immediately setting the case for pre-trial conference and directing the parties to submit their respective pre-trial briefs. The parties shall file with the court and furnish each other copies of their respective pre-trial brief in such manner as to ensure its receipt by the court and the other party at least five (5) days before the date set for the pre-trial. The parties shall set forth in their pre-trial briefs, among other matters, the following: 1. Brief statement of the nature of the case, which shall summarize the theory or theories of the party in clear and concise language; 2. Allegations expressly admitted by either or both parties; 3. Allegations deemed admitted by either or both parties; 4. Documents not specifically denied under oath by either or both parties; 5. Amendments to the pleadings; 6. Statement of the issues, which shall separately summarize the factual and legal issues involved in the case; 7. Names of witnesses to be presented and the summary of their testimony as contained in their affidavits supporting their positions on each of the issues; 8. All other pieces of evidence, whether documentary or otherwise and their respective purposes; 9. Specific proposals for an amicable settlement;

10. Possibility of referral to mediation or other alternative modes of dispute resolution; 11. Proposed schedule of hearings; and 12. Such other matters as may aid in the just and speedy disposition of the case. SEC. 2. Nature and purpose of pre-trial conference. During the pre-trial conference, the court shall, with its active participation, ensure that the parties consider in detail all of the following: 1. The possibility of an amicable settlement; 2. Referral of the dispute to mediation or other forms of dispute resolution; 3. Facts that need not be proven, either because they are matters of judicial notice or expressly or deemed admitted; 4. Amendments to the pleadings; 5. The possibility of obtaining stipulations and admissions of facts and documents; 6. Objections to the admissibility of testimonial, documentary and other evidence; 7. Objections to the form or substance of any affidavit, or part thereof; 8. Simplification of the issues; 9. The possibility of submitting the case for decision on the basis of position papers, affidavits, documentary and real evidence; 10. A complete schedule of hearing dates; and 11. Such other matters as may aid in the speedy and summary disposition of the case. SEC. 3. Termination. The preliminary conference shall be terminated not later than ten (10) days after its commencement, whether or not the parties have agreed to settle amicably. SEC. 4. Judgment before pre-trial. If, after submission of the pre-trial briefs, the court determines that, upon consideration of the pleadings, the affidavits and other evidence submitted by the parties, a judgment may be rendered, the court may order the parties to file simultaneously their respective memoranda within a non-extendible period of twenty (20) days from receipt of the order. Thereafter, the court shall render judgment, either full or otherwise, not later than ninety (90) days from the expiration of the period to file the memoranda. SEC. 5. Pre-trial order; judgment after pre-trial. The proceedings in the pre-trial shall be recorded. Within ten (10) days after the termination of the pre-trial, the court shall issue an order which shall recite in detail the matters taken up in the conference,

the actions taken thereon, the amendments allowed in the pleadings, and the agreements or admissions made by the parties as to any of the matters considered. The court shall rule on all objections to or comments on the admissibility of any documentary or other evidence, including any affidavit or any part thereof. Should the action proceed to trial, the order shall explicitly define and limit the issues to be tried and shall strictly follow the form set forth in Annex "A" of these Rules. The contents of the order shall control the subsequent course of the action, unless modified before trial to prevent manifest injustice. After the pre-trial, the court may render judgment, either full or partial, as the evidence presented during the pre-trial may warrant. RULE 5 TRIAL SECTION 1. Witnesses. If the court deems necessary to hold hearings to determine specific factual matters before rendering judgment, it shall, in the pretrial order, set the case for trial on the dates agreed upon by the parties. Only persons whose affidavits were submitted may be presented as witnesses, except in cases specified in section 8, Rule 2 of these Rules. The affidavits of the witnesses shall serve as their direct testimonies, subject to cross-examination in accordance with existing rules on evidence. SEC. 2. Trial schedule. Unless judgment is rendered pursuant to Rule 4 of these Rules, the initial hearing shall be held not later than thirty (30) days from the date of the pre-trial order. The hearings shall be completed not later than sixty (60) days from the date of the initial hearing, thirty (30) days of which shall be allotted to the plaintiffs and thirty (30) days to the defendants in the manner prescribed in the rep-trial order. The failure of a party to present a witness on a scheduled hearing date shall be deemed a waiver of such hearing date. However, a party may present such witness or witnesses within his remaining allotted hearing dates. SEC. 3. Written offer of evidence. Evidence not otherwise admitted by the parties or ruled upon by the court during the pre-trial conference shall be offered in writing not later than five (5) days from the completion of the presentation of evidence of the party concerned. The opposing party shall have five (5) days from receipt of the offer to file his comments or objections. The court shall make its ruling on the offer within five (5) days from the expiration of the period to file comments or objections.

SEC. 4. Memoranda. Immediately after ruling on the last offer of evidence, the court shall order the parties to simultaneously file, within thirty (30) days from receipt of the order, their respective memoranda. The memoranda shall contain the following: 1. A "Statement of the Case," which is a clear and concise statement of the nature of the action and a summary of the proceedings; 2. A "Statement of the Facts," which is a clear and concise statement in narrative form of the established facts, with reference to the testimonial, documentary or other evidence in support thereof; 3. A "Statement of the issues," which is a clear and concise statement of the issues presented to the court for resolution; 4. The "Arguments," which is a clear and concise presentation of the argument in support of each issue; and 5. The "Relief," which is a specification of the order or judgment which the party seeks to obtain. No reply memorandum shall be allowed. SEC. 5. Decision after trial. The court shall render a decision not later than (90) days from the lapse of the period to file the memoranda, with or without said pleading having been filed. RULE 6 ELECTION CONTESTS SECTION 1. Cases covered. The provisions of this rule shall apply to election contests in stock and non-stock corporations. SEC. 2. Definition. An election contest refers to any controversy or dispute involving title or claim to any elective office in a stock or non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stockholders in a close corporation or by members of a nonstock corporation where the articles of incorporation or by-laws so provide. SEC. 3. Complaint. In addition to the requirements in section 4, Rule 2 of these Rules, the complaint in an election contest must state the following: 1. The case was filed within fifteen (15) days from the date of the election if the bylaws of the corporation do not provide for a procedure for resolution of the controversy, or within fifteen (15) days from the resolution of the controversy by the corporation as provided in its by-laws; and

2. The plaintiff has exhausted all intra-corporate remedies in election cases as provided for in the by-laws of the corporation. SEC. 4. Duty of the court upon the filing of the complaint. Within two (2) days from the filing of the complaint, the court, upon a consideration of the allegations thereof, may dismiss the complaint outright if it is not sufficient in form and substance, or, if it is sufficient, order the issuance of summons which shall be served, together with a copy of the complaint, on the defendant within two (2) days from its issuance. SEC. 5. Answer. The defendant shall file his answer to the complaint, serving a copy thereof on the plaintiff, within ten (10) days from service of summons and the complaint. The answer shall contain the matters required in section 6, Rule 2 of these Rules. SEC. 6. Affidavits, documentary and other evidence. The parties shall attach to the complaint and answer the affidavits of witnesses, documentary and other evidence in support thereof, if any. Acting on the Memorandum of the Committee on SEC Cases submitting for this Courts consideration and approval the Proposed Interim Rules of Procedure for Intra-Corporate Controversies, the Court Resolved to APPROVE the same. The Interim Rules shall take effect on April 1, 2001 following its publication in two (2) newspapers of general circulation. March 13, 2001, Manila.

RULES OF PROCEDURE ON CORPORATE REHABILITATION [A.M. No. 00-8-10-SC] RESOLUTION Acting on the recommendation of the Subcommittee on Special Rules for Special Commercial Courts, submitting for the consideration and approval of the Court the Resolved to APPROVED the same. The Rule shall take effect on January 16, 2009 following its publication in two (2) newspapers of general circulation. RULE 1 COVERAGE Section 1. Scope - These Rules shall apply to petitions for rehabilitation of corporations, partnerships and associations pursuant to Presidential Decree No. 902A, as amended. Section 2. Applicability to Rehabilitation Cases Transferred from the Securities and Exchange Commission. - Cases for rehabilitation transferred from Securities Exchange Commission to the Regional Trial Court pursuant to Republic Act No. 8799, otherwise known as The Securities Regulation Code, shall likewise be governed by these Rules. RULE 2 DEFINITION OF TERMS AND CONSTRUCTION Section 1. Definition of Terms. - For purpose of these Rules: "Administrative Expenses" shall refer to (a) reasonable and necessary expenses that are incurred in connection with the filing of the petition; (b) expenses incurred in the ordinary course of business after the issuance of the stay order, excluding interest payable to the creditors for loans and credit accommodations existing at the time of the issuance of the stay order, and (c) other expenses that are authorized under this Rules. "Affidavit of General Financial Condition" shall refer to a verified statement on the general financial condition of the debtor requiredin Section 2, Rule 4 of these Rules. "Affiliate" is a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or is under the common control of another corporation, which thereby becomes its parent corporation. "Asset" is anything of value that can be in the form of money, such as cash at the bank or amounts owed; fixed assets such as property or equipment; or intangibles including

intellectual property, the book value of which is shown in the last three audited financial statement immediately preceding the filing of the petition, In case the debtor is less than three years in operation, it is sufficient that the book value is based on the audited financial statement\s for the years or year immediately preceding the filing of petition, as the case may be. "Board of Directors" shall include the executive committee or the management of partnership or association "Claim" shall include all claims or demands of whatever nature or charter against a debtor or its property, whether for money or otherwise "Control" is the power of a parent corporation to direct or govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed to exit when the parent owns, directly or indirectly though subsidiaries, more than one - half () of the voting power of the voting power of an enterprise unless, unless, in exception circumstances, it can clearly be demonstrated that such own ship does not constitute control. Control also exits even when the parents owns one-half (1/2) or less of the voting power of an enterprise when there is power. (A) Over more than one-half () of agreement with investors; (B) To direct or govern the financial and operating policies of the enterprise under a statute or agreement; (C) To appoint or remove the majority of the member of the board of directors or equivalent governing body; or (D) To cast the majority votes at meeting of the board of directors or equivalent governing body. "Creditor" shall mean any holder or a Chain "Court" shall refer to the proper Regional Trial Court designated to hear and decide the cases contemplated contemplated under these Rules. "Days" shall refer to calendar days unless otherwise provided in these Rules. "Debtor" shall mean any corporation, partnership or association or a group of companies, whether supervised or regulated by the Securities and Exchange Commission or other government agencies, on whose behalf a petition for rehabilitation has been filed under these rules. "Foreign count" means a judicial or other authority competent to control or supervise a foreign proceeding.

"Foreign proceeding" means a collective judicial or administrative proceeding in a foreign State, interim proceeding, pursuant to a law re solvency in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign count, for the purpose of rehabilitation or re-organization "Foreign Representative" means person or entity, including one appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or rehabilitation of the debtor or act as a representative of the foreign proceeding. "Group of companies" refers to, and can cover only, corporation that are financially refers to, and can cover only, corporations that are financially rated to one another as parent corporation, subsidiaries and affiliates. When the petition covers a group of companies, all reference under these Rules to "debtor" shall include and apply include and apply to the group of companies. "Liabilities" shall refer to monetary claims against the debtor, including stockholders advances that have been recoded in the debtor's audited financial statements as advances for subscription. "Parent" is a corporation directly or indirectly though one or more intermediaries. "Rehabilitation" shall mean the restoration of the debtor to a position of successful operation and solvency, if it is shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value of payments projected in the plan more if the corporation continues as a going concern than if it immediately liquidated. "Secured claim" shall refer to any clan whose payment or fulfillment is secured by contract or by law, including any clam or credit enumerated under Articles 2241 and 2242 of the civil Code and Article 110, as amended, of the Labor code of the Philippines. "Subsidiary" mean a corporation more than fifty percent (50%) of the voting stock of which is owned or controlled directly or indirectly though one or more intermediaries by another corporation "Unsecured clan" shall mean any clan other than a seared claim. Section 2. Construction - These Rules shall be liberally construed to carry out the objectives of Section 5(d), 6(d) and 6(d) of Presidential Decree No. 902-A, as amended, and to assist the parties in obtaining a jut, expeditious and inexpensive determination of case. Where applicable, the Rules of Court shall apply supplementary to proceedings under these Rules. RULES 3 GENERAL PROVISONS

Section 1. Nature of Proceeding - Any proceeding initiated under these Rules shall be considered in rem. Jurisdiction over all persons affected by the proceeding shall be considered as acquired upon publication of the notice of the commencement of the proceedings in any newspaper or general circulation in the Philippines in the manner prescribed by these rules. The proceedings shall also be summary and non-adversarial in nature. The following pleading are prohibited: (a) Motion to dismiss; (b) Motion for a bill of particulars: (c) Petition for relief; (d) Motion for extension; (e) Motion for postponement (f) Third-party complaint; (g) Intervention; (h) Motion to hear affirmative defenses; and (I) Any pleading or motion which is similar to or of like effect as any of the foregoing. Any pleading, motion, opposition, defense or claim filed by any interested party shall be supported by verified statements that the affiant has read same and that the factual allegations therein are true and correct of his personal knowledge or based on authentic records, and correct of his personal knowledge or based on authentic records, and shall contain as annexes such documents as may be deemed by the party court may be decide matters on the basis of affidavits and other documentary evidence. Where necessary, the court shall conduct clarificatory hearings before resolving any matter submitted to it for resolution. Section 2. Venue. - Petitions for rehabilitation pursuant to these Rules shall be filed in the regional trial court which has jurisdiction over the principal office of the debtor as specified in its articles of incorporation or partnership. Where the principal office of the corporation, partnership or association is registered in the Securities and Exchange Commission as Metro Manila, the action must be filed in the regional trial court of the city or municipality where the head office is located. A joint petition by a group of companies shall be filed in the Regional Trial Court which has jurisdiction over the principal office of the parent company, as specified in its Articles of Incorporation.

Section 3. Service of Pleadings and Documents. - When so authorized by the court, any pleading and/or document required by these Rules may be filed with the court and/or served upon the other parties by facsimile transmission (fax) or electronic mail (email). In such cases, the date of transmission shall be deemed to be the dtae of service. Where the pleading or document is voluminous, the court may, upon motion, waive the requirement of service; provided that a copy thereof together with all its attachments is duly filed with the court and is made available for examination and reproduction by any party, and provided, further, that a notice of such filing and availability is duly served on the parties. Section 4. Trade Secrets and Other Confidential Information. - Upon motion, the court may issue an order to protect trade secrets or other confidential research, development or commercial information belonging to the debtor. Section 5. Executory Nature of Orders. - Any order issued by the court under these Rules is immediately executory. A petition to review the order shall not stay the execution of the order unless restrained or enjoined by the appellate court. Unless otherwise provided in these Rules, the review of any order or decision of the court or an appeal therefrom shall be in accordance with the Rules of Court; provided, however, that the reliefs ordered by the trial or appellate courts shall take into account the need for resolution of proceedings in a just, equitable and speedy manner. Section 6. Nullification of Illegal Transfers and Preferences. - Upon motion the court may nullify any transfer of property or any other conveyance, sale, payment or agreement made in violation of its stay order or in violation of these Rules. Section 7. Stay Order. - If the court finds the petition to be sufficient in form and substance, it shall; not later than five (5) working days from the filing of the petition, issue an order: (a) appointing a rehabilitation receive and fixing his bond; (b) staying enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise, against the debtor, its guarantors and persons not solidarily liable with the debtor; provided, that the stay order shall not cover claims against letters of credit and similar security arrangements issued by a third party to secure the payment of the debtor's obligations; provided, further, that the stay order shall not cover foreclosure by a creditor of property not belonging to a debtor under corporate rehabilitation; provided, however, that where the owner of such property sought to be foreclosed is also a guarantor or one who is not solidarily liable, said owner shall be entitled to the benefit of excussion as such guarantor; (c) prohibiting the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (d) prohibiting the debtor from making any payment of its liabilities except as provided in items (e),

(f) and (g) of this Section or when ordered by the court pursuant to Section 10 of Rule 3; (e) prohibiting the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order; (f) directing the payment in full of all administrative expenses incurred after the issuance of the stay order; (g) directing the payment of new loans or other forms of credit accommodations obtained for the rehabilitation of the debtor with prior court approval; (h) fixing the dates of the initial hearing on the petition not earlier than forty-five (45) days but not later than sixty (60) days from the filing thereof; (I) directing the petitioner to publish the Order in a newspaper of general circulation in the Philippines once a week for two (2) consecutive weeks; (j) directing the petitioner to furnish a copy of the petition and its annexes, as well as the stay order, to the creditors named in the petition and the appropriate regulatory agencies such as, but not limited to, the Securities and Exchange Commission, the Bangko Sentral ng Pilipinas, the Insurance Commission, the National Telecommunications Commission, the Housing and Land Use Regulatory Board and the Energy Regulatory Commission; (k) directing the petitioner that foreign creditors with no known addresses in the Philippines be individually given a copy of the stay order at their foreign addresses; (l) directing all creditors and all interested parties (including the regulatory agencies concerned) to file and serve on the debtor a verified comment on or opposition to the petition, with supporting affidavits and documents, not later than fifteen (15) days before the date of the first initial hearing and putting them on notice that their failure to do so will bar them from participating in the proceedings; and (m) directing the creditors and interested parties to secure from the court copies of the petition and its annexes within such time as to enable themselves to file their comment on or opposition to the petition and to prepare for the initial hearing of the petition. The issuance of a stay order does not affect the right to commence actions or proceedings insofar as it is necessary to preserve a claim against the debtor. Section 8. Service of Stay Order on Rehabilitation Receiver. - The petitioner shall immediately serve a copy of the stay order on the rehabilitation receiver appointed by the court, who shall manifest his acceptance or non-acceptance of his appointment not later than ten (10) days from receipt of the order. Section 9. Period of Stay Order. - The stay order shall be effective from the date of its issuance until the approval of the rehabilitation plan or the dismissal of the petition. Section 10. Relief from, Modification, or Termination of Stay Order. -

(a) The court may, upon motion, terminate, modify, or set conditions for the continuance of the stay order, or relieve a claim from the coverage thereof upon showing that (1) any of the allegations in the petition, or any of the contents of any attachment, or the verification thereof has ceased to be true; (2) a creditor does not have adequate protection over property securing its claims; (3) the debtor's secured obligation is more than the fair market value of the property subject of the stay and such property is not necessary for the rehabilitation of the debtor; or (4) the property covered by the stay order is not essential or necessary to the rehabilitation and the creditor's failure to enforce its claim will cause more damage to the creditor than to the debtor. (b) For purposes of this Section, the creditor lacks adequate protection if it can be shown that: (1) The debtor fails or refuses to honor a pre-existing agreement with the to keep the property insured; (2) The debtor fails or refuses to take commercially reasonable steps to maintain the property; or (3) The property has depreciated to an extent that the creditor is undersecured (c) Upon showing the creditor's lack of adequate protection, the court shall order the rehabilitation receiver to (1) make arrangements to provide for the insurance or maintenance of the property, or (2) to make payments or otherwise provide additional or replacement security such as that the obligation is fully secured. If such arrangements are not feasible, the court shall modify the stay order to allow the secured creditor lacking adequate protection to enforce its claim against the debtor; provided, however, that the court may deny the creditor the remedies in this paragraph if such remedies would prevent the continuation of the debtor as a going concern or otherwise prevent the approval and implementation of a rehabilitation plan. Section 11. Qualifications of Rehabilitation Receiver. (a) In the appointment of the rehabilitation receiver, the following qualifications shall be taken into consideration by the court: (1) Expertise and acumen to manage and operate a business similar in size and complexity to that of the debtor; (2) Knowledge in management, finance and rehabilitation of distressed companies; (3) General familiarity with the rights of creditors in suspension of payments or rehabilitation and general understanding of the duties and obligations of a rehabilitation receiver;

(4) Good moral character, independence and integrity; (5) Lack of conflict of interest as defined in this Section; and (6) Willingness and ability to file a bond in such amount as may be determined by the court. (b) Without limiting the generality of the following, a rehabilitation receiver may be deemed to have a conflict of interest if: (1) He is creditor or stockholder of the debtor; (2) He is engaged in a line of business which competes with the debtor; (3) He is, or was within two (2) years from the filing of the petition, a director, officer, or employee or the auditor or accountant of the debtor; (4) He is or was within two (2) years from the filing of the petition, an underwriter of the outstanding securities of the debtor; (5) He is related by consanguinity or affinity within the fourth civil degree to any creditor, stockholder, director, officer, employee, or underwriter of the debtor; or (6) He has any other direct or indirect material interest in the debtor or any creditor. Section 12. Powers and Functions of Rehabilitation Receiver. - The rehabilitation receiver shall not take over the management and control of the debtor but shall closely oversee and monitor the operations of the debtor during the pendency of the proceedings. For this purpose, the rehabilitation receiver shall have the powers, duties and functions of a receiver under Presidential Decree No. 902-A, as amended, and the Rules of Court. The rehabilitation receiver shall be considered as an officer of the court. He shall be primarily tasked to study the best way to rehabilitate the debtor and to ensure that the value of the debtor's property is reasonably maintained pending the determination of whether or not the debtor should be rehabilitated, as well as implement the rehabilitation plan after its approval. Accordingly, he shall have the following powers and functions: (a) To verify the accuracy of the petition, including its annexes such as the Schedule of Debts and Liabilities and the Inventory of Assets submitted in support to the petition; (b) To accept and incorporate, when justified, amendments to the Schedule of Debts and Liabilities;

(c) To recommend to the court the disallowance of claims and rejection of amendments t the Schedule of Debts and Liabilities that lack sufficient proof and justification; (d) To submit to the court and make available for review by the creditors, a revised Schedule of Debts and Liabilities; (e) To investigate the acts, conduct, properties, liabilities and financial condition of the debtor, the operation of its business and the desirability of the continuance thereof; and, any other matter relevant to the proceeding or to the formulation of a rehabilitation plan; (f) To examine under oath the directors and officers of the debtor and any other witnesses that he may deem appropriate; (g) To make available to the creditors documents and notices necessary for them to follow and participate in the proceedings; (h) To report to the court any fact ascertained by him pertaining to the causes of the debtor's problems, fraud, preferences, dispositions, encumbrances, misconduct, mismanagement and irregularities committed by the stockholders, directors, management,, or any other person against the debtor; (i) To employ such person or persons such as lawyers, accountants, appraisers and staff are necessary in performing his functions and duties as rehabilitation receiver; (j) To monitor the operations of the debtor and to immediately report to the court any material adverse change in the debtor's business; (k) To evaluate the existing assets and liabilities, earnings and operations of the debtor; (l) To determine and recommend to the court the best way to salvage and protect the interests of the creditors, stockholders and the general public; (m) To study the rehabilitation plan proposed by the debtor or any rehabilitation plan submitted during the proceedings, together with any comments made thereon; (n) To prohibit and report to the court any encumbrance, transfer or disposition of the debtor's property outside of the ordinary course of business or what is allowed by the court; (o) To prohibit and report to the court any payments outside of the ordinary course of business; (p) To have unlimited access to the debtor's employees, premises, books, records and financial documents during business hours;

(q) To inspect, copy, photocopy or photograph any document, paper, book, account or letter, whether in the possession of the debtor or other persons; (r) To gain entry into any property for the purpose of inspecting, measuring, surveying or photographing it or any designated relevant object or operation thereon; (s) To take possession, control and custody of the debtor's assets; (t) To notify counterparties and the court as to contracts that the debtor has decided to continue to perform the breach; (u) To be notified of and to attend all meetings of the board of directors and stockholder of the debtor; (v) To recommend any modification of an approved rehabilitation plan as he may deem appropriate; (w) To bring to the attention of the court any material change affecting the debtor's ability to meet the obligations under the rehabilitation plan; (x) To recommend the appointment of a management committee in the cases provided for under Presidential Decree No. 902-A, as amended; (y) To recommend the termination of the proceedings and the dissolution of the debtor if he determines that the continuance in business of such entity is no longer feasible or profitable or no longer works to the best interest of the stockholders, parties-litigants, creditors or the general public; (z) To apply to the court for any order or directive that he may deem necessary or desirable to aid him in the exercise of his powers and performance of his duties and functions; and (aa) To exercise such other powers as may from time to time be conferred upon him by the court. Section 13. Oath and Bond. - Before entering upon his powers, duties and functions, the rehabilitation receiver must be sworn in to perform them faithfully, and must post a bond executed in favor of the debtor in such sum as the court may direct, to guarantee that he will faithfully discharge his duties and obey the orders of the court. If necessary, he shall also declare under oath that he will perform the duties of a trustee of the assets of the debtor, will act honestly and in good faith, and deal with the assets of the debtor on a commercially reasonable manner. Section 14. Fees and Expenses. - The rehabilitation receiver and the persons hired by him shall be entitled to reasonable professional fees and reimbursement of expenses which shall be considered as administrative expenses.

Section 15. Immunity from Suit. - The rehabilitation receiver shall not be subject to any action, claim or demand in connection with any act done or omitted by him in good faith in the exercise of his functions and powers herein conferred. Section 16. Reports. - The rehabilitation receiver shall file a written report every three (3) months to the court or as often as the court may require on the general condition of the debtor. The report shall include, at the minimum, interim financial statements of the debtor. Section 17. Dismissal of Rehabilitation Receiver. - A rehabilitation receiver may, upon motion, be dismissed by the court on the following grounds: (a) if he fails, without just cause, to perform any of his powers and functions under these Rules; or (b) on any of the grounds for removing a trustee under the general principles of trusts. Section 18. Rehabilitation Plan. - The rehabilitation plan shall include (a) the desired business targets or goals and the duration and coverage of the rehabilitation; (b) the terms and conditions of such rehabilitation which shall include the manner of its implementation, giving due regard to the interests of secured creditors such as, but not limited, to the non-impairment of their security liens or interests; (c) the material financial commitments to support the rehabilitation plan; (d) the means for the execution of the rehabilitation plan, which may include debt to equity conversion, restructuring of the debts, dacion en pago or sale exchange or any disposition of assets or of the interest of shareholders, partners or members; (e) a liquidation analysis setting out for each creditor that the present value of payments it would receive under the plan is more than that which it would receive if the assets of the debtor were sold by a liquidator within a six-month period from the estimated date of filing of the petition; and (f) such other relevant information to enable a reasonable investor to make an informed decision on the feasibility of the rehabilitation plan. Section 19. Repayment Period. - If the rehabilitation plan extends the period for the debtor to pay its contractual obligations, the new period should not extend beyond fifteen (15) years from the expiration of the stipulated term existing at the time of filing of the petition. Section 20. Effects of Rehabilitation Plan. - The approval of the rehabilitation plan by the court shall result in the following: (a) The plan and its provisions shall be binding upon the debtor and all persons who may be affected thereby, including the creditors, whether or not such persons have participated in the proceedings or opposed the plan or whether or not their claims have been scheduled; (b) The debtor shall comply with the provisions of the plan and shall take all actions necessary to carry out the plan;

(c) Payments shall be made to the creditors in accordance with the provisions of the plan; (d) Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to apply to the extent that they do not conflict with the provisions of the plan; and (e) Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on creditors regardless of whether or not the plan is successfully implemented. Section 21. Revocation of Rehabilitation Plan on Grounds of Fraud. - Upon motion, within ninety (90) days from the approval of the rehabilitation plan, and after notice and hearing, the court may revoke the approval thereof on the ground that the same was secured through fraud. Section 22. Alteration or Modification of Rehabilitation Plan. - An approved rehabilitation plan may, upon motion, be altered or modified if, in the judgement of the court, such alteration or modification is necessary to achieve the desired targets or goals set forth therein. Section 23. Termination of Proceedings. - The court shall, upon motion or upon recommendation of the rehabilitation receiver, terminate the proceeding in any of the following cases: (a) Dismissal of the petition; (b) Failure of the debtor to submit the rehabilitation plan; (c) Disapproval of the rehabilitation plan by the court; (d) Failure to achieve the desired targets or goals as set forth in the rehabilitation plan; (e) Failure of the debtor to perform its obligations under the plan; (f) Determination that the rehabilitation plan may no longer be implemented in accordance with its terms, conditions, restrictions or assumptions; or (g) Successful implementation of the rehabilitation plan. Section 24. Discharge of Rehabilitation Receiver. - Upon termination of the rehabilitation proceedings, the rehabilitation receiver shall submit his final report and accounting with such period of time as the court will allow him. Upon approval of his report and accounting, the court shall order his discharge. RULE 4 DEBTOR-INITIATED REHABILITATION

Section 1. Who May Petition. - Any debtor who foresees the impossibility of meeting its debts when they respectively fall due, may petition the proper regional trial court for rehabilitation. A group of companies may jointly file a petition for rehabilitation under these Rules when one or more of its constituent corporations foresee the impossibility of meeting debts when they respectively fall due, and the financial distress would likely adversely affect the financial condition and/or operations of the other member companies of the group is essential under the terms and conditions of the proposed rehabilitation plan. Section 2. Contents of Petition. (a) The petition filed by the debtor must be verified and must set forth with sufficient particularity all the following material facts: (1) the name and business of the debtor; (2) the nature of the business of the debtor; (3) the history of the debtor; (4) the cause of its inability to pay its debts; (5) all the pending actions or proceedings known to the debtor and the courts or tribunals where they are pending; (6) threats or demands to enforce claims or liens against the debtor; and (7) the manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors, employees and stockholders. (b) The petition shall be accompanied by the following documents: (1) An audited financial statement of the debtor at the end of its last fiscal year; (2) Interim financial statements as of the end of the month prior to the filing of the petition; (3) A Schedule of Debts and Liabilities which lists all the creditors of the debtor, indicating the name and last address of record of each creditor; the amount of each claim as to principal, interest, or penalties due as of the date of filing; the nature of the claim; and any pledge, lien, mortgage judgement or other security given for the payment thereof; (4) An Inventory of Assets which must list with reasonable specificity all the assets of the debtor, stating the nature of each asset, the location and condition thereof, the book value or market value of the asset, and attaching the corresponding certificate of title thereof in case of real property, or the evidence of title or ownership in case of movable property, the encumbrances, liens or claims thereon, if any, and the identities and addresses of the lienholders and claimants. The Inventory shall include a Schedule of Accounts Receivable which must indicate the amount of each, the persons from who due, the date of maturity and the degree of collectibility categorizing them as highly collectible to remotely collectible;

(5) A rehabilitation plan which conforms with the minimal requirements set out in Section 18 of Rule 3; (6) A Schedule of Payments and Disposition of Assets which the debtor may have effected within three (3) months immediately preceding the filing of the petition; (7) A Schedule of Cash Flow of the debtor for three (3) months immediately preceding the filing of the petition, and a detailed schedule of the projected cash flow for the succeeding three (3) months; (8) A Statement of Possible Claims by or against the debtor which must contain a brief statement of the facts which might give rise to the claim and an estimate of the probable amount thereof; (9) An Affidavit of General Financial Condition which shall contain answers to the questions or matters prescribed in Annex "A" hereof; (10) At least three (3) nominees for the position of rehabilitation receiver as well as their qualifications and addresses, including but not limited to their telephone numbers, fax numbers and e-mail address; and (11) A certificate attesting under oath that (i) the filing of the petition has been duly authorized; and (ii) the directors and stockholders of the debtor have irrevocably approved and/or consented to, in accordance with existing laws, all actions or matters necessary and desirable to rehabilitate the debtor including, but not limited to, amendments to the articles of incorporation and by-laws or articles of partnership; increase or decrease in the authorized capital stock; issuance of bonded indebtedness; alienation, transfer, or encumbrance of assets of the debtor; and modification of shareholders' rights. (c) Five (5) copies of the petition shall be filed with the court. Section 3. Verification by Debtor. - The petition filed by the debtor must be verified by an affidavit of a responsible officer of the debtor and shall be in a form substantially as follows: "I, ___________________, (position) of (name of petitioner), do solemnly swear that the petitioner has been duly authorized to file the petition and that the stockholders and board of directors (or governing body) have approved and/or consented to, accordance with law, all actions or matters necessary or desirable to rehabilitate the debtor. The petition is being filed to protect the interests of the debtor, the stockholders, the inventors and the creditors of the debtor, which warrant the appointment of a rehabilitation receiver. There is no petition for insolvency filed with any other body, court of tribunal affecting the petitioner. The Inventory of Assets and the Schedule of Debts and Liabilities contains a full, correct

and true description of all debts and liabilities and of all goods, effects, estate and property of whatever kind of class belonging to petitioner. The Inventory also contains a full, correct and true statement of all debts owing or due to petitioner, or to any person or persons in trust for petitioner and of all securities and contracts whereby any money may hereafter become due or payable to petitioner or by or through which any benefit or advantage may accrue to petitioner. The petition contains a concise statement of the facts giving rise, or which might give rise, to any cause of action in favor of petitioner. Petitioner has no land, money, stock, expectancy, or property of any kind, except those set forth in the Inventory of Assets. Petitioner has, in no instance, created or acknowledged a debt for a greater sum than the true and correct amount. Petitioner, its officers, directors and stockholders have not, directly or indirectly, concealed, fraudulently sold or otherwise fraudulently disposed of, any part of petitioner's real or personal property, estate, effects or rights of action, and petitioner, its officers, directors and stockholders have not in any way compounded with any of its creditors in order to give preference to such creditors, or to receive or to accept any profit or advantage therefrom, or to defraud or deceive in any manner any creditor to whom petitioner is indebted. Petitioner, its officers, directors, and stockholders have been acting in good faith and with due diligence. Section 4. Opposition to or Comment on Petition. - Every creditor of the debtor or any interested party shall file his verified opposition to or comment on the petition not later than fifteen (15) days before the date of the initial hearing fixed in the stay order. After such time, no creditor or interested party shall be allowed to file any comment thereon or opposition thereto without leave of court. If the Schedule of Debts and Liabilities omits a claim or liability, the creditor concerned shall attach to its comment or opposition a verified statement of the obligations allegedly due it. Section 5. Initial Hearing. (a) On or before the initial hearing set in the order mentioned in Section 7 of Rule 3, the petitioner shall file a publisher's affidavit showing that the publication requirements and a petitioner's affidavit showing that the notification requirement for foreign creditors had been complied with, as required in the stay order. (b) Before proceeding with the initial hearing, the court shall determine whether the jurisdictional requirements set forth above had been complied with. After finding that such requirements are met, the court shall ensure that the parties consider in detail all of the following: (1) Amendments to the rehabilitation plan proposed by the debtor; (2) Simplification of the issues;

(3) The possibility of obtaining stipulations and admission of facts and documents, including resort to request for admission under Rule 26 of the Rule of Court; (4) The possibility of amicably agreeing on any issue brought up in the comments on, or opposition to, the petition; (5) Referral of any accounting, financial and other technical issues to an expert; (6) The possibility of submitting the petition for decision on the basis of the comments, opposition, affidavit and other documents on record; (7) The possibility of a new rehabilitation plan voluntarily agreed upon by the debtor and its creditors; and (8) Such other matters as may aid in the speedy and summary disposition of the case. Section 6. Additional Hearings. - The court may hold additional hearings as part of the initial hearing contemplated in these Rules but the initial hearing must be concluded not later than ninety (90) days from the initial date of the initial hearing fixed in the stay order. Section 7. Order After Initial Hearing. (a) Within twenty (20) days after the last hearing, the court shall issue an order which shall: (1) Give due course to the petition and immediately refer the petition and its annexes to the rehabilitation receiver who shall evaluate the rehabilitation plan and submit his recommendations to the court not later than ninety (90) days from the date of the last initial hearing, if the court is satisfied that there is merit to the petition, otherwise the court shall immediately dismiss the petition; and (2) Recite in detail the matters taken up in the initial hearing and the action taken thereon, including a substitute rehabilitation plan contemplated in Sections 5 (b)(7) and (8) of this Rule; (b) If the debtor and creditors agree on a new rehabilitation plan pursuant to Section 5 (b)(7) of this Rule, the order shall so state the fact and require the rehabilitation receiver to supply the details of the plan and submit it for the approval of the court not later than sixty (6) days from the date of the last initial hearing. The court shall approve the new rehabilitation plan not later than ninety (90) days from the date of the last initial hearing upon concurrence of the following: (1) Approval or endorsement of creditors holding at least two-thirds (2/3) of the total liabilities of the debtor including secured creditors holding more than fifty

percent (50%) of the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the total unsecured claims of the debtor; (2) The rehabilitation plan complies with the requirements specified in Section 18 of Rule 3; (3) The rehabilitation plan would provide the objecting class of creditors with payments whose present value projected in the plan would be greater than that which they would have received if the assets of the debtor were sold by a liquidator within a six (6) month period from the date of filing of the petition; and (4) The rehabilitation receiver has recommended approval of the plan. The approval by the court of the new rehabilitation plan shall have the same effect as approval of a rehabilitation plan under Section 20 of Rule 3. Section 8. Creditors' Meetings. - If no new rehabilitation plan is agreed upon by the debtor and the creditors, the rehabilitation receiver, at any time before he submits his evaluation on the debtor-proposed rehabilitation plan to the court as prescribed in Section 7(a)(1) of this Rule, shall, either alone or with the debtor, meet with the creditors or any interested party t discuss the plan with a view to clarifying or resolving any matter connected therewith. Section 9. Comments on or Opposition to Rehabilitation Plan. - Any creditor or interested party of record may file comments on or opposition to the proposed rehabilitation plan, with a copy given to the rehabilitation receiver, not later than sixty (60) days from the date of the last initial hearing. The court shall conduct summary and non-adversarial proceedings to receive evidence, if necessary, in hearing the comments on and opposition to the plan. Section 10. modification of Proposed Rehabilitation Plan. - The debtor may modify its rehabilitation plan in the light of the comments of the rehabilitation receiver and creditors or any interested party and submit a revised or substitute rehabilitation plan for the final approval of the court. Such rehabilitation plan must be submitted to the court not later than ten (10) moths from the date of filing of the petition. Section 11. Approval of Rehabilitation Plan. - The court may approve a rehabilitation plan even over the opposition of creditors of the debtor if, in its judgement, the rehabilitation of the debtor is feasible and the opposition of the creditors is manifestly unreasonable if the following are present: (a) The rehabilitation plan complies with the requirements specified in Section 18 of Rule 3; (b) The rehabilitation plan would provide the objecting class of creditors with payments whose present value projected in the plan would be greater than that which

they would have received if the assets of the debtor were sold by a liquidator within a six (6)-month period from the date of filing of the petition; and (c) The rehabilitation receiver has recommended approval of the plan. In approving the rehabilitation plan, the court shall ensure that the rights of the secured creditors are not impaired. The court shall also issue the necessary orders or processes for its immediate and successful implementation. it may impose such terms, conditions, or restrictions as the effective implementation and monitoring thereof may reasonably require, or for the protection and preservation of the interests of the creditors should the plan fall. Section 12. Period to Decide Petition. - The court shall decide the petition within one (1) year from the date of filing of the petition, unless the court, for good cause shown, is able to secure an extension of the period from the Supreme Court. RULE 5 CREDITOR-INITIATED REHABILITATION Section 1. Who May Petition. - Any creditor or creditors holding at least twenty percent (20%) of the debtor's total liabilities may file a petition with the proper regional trial court for rehabilitation of a debtor that cannot meet its debts as they respectively fall due. Section 2. Requirements for Creditor-Initiated Petitions. - Where the petition is filed by a creditor or creditors under this Rule, it is sufficient that the petition is accompanied by a rehabilitation plan and a list of at least three (3) nominees to the position of rehabilitation receiver and verified by a sworn statement that the affiant has read the petition and that its contents are true and correct of his personal knowledge or based on authentic records and that the petition is being filed to protect the interests of the debtor, the stockholders, the investors and the creditors of the debtor. Section 3. Applicability of Provisions Relating to Debtor-Initiated Rehabilitation. The provisions of Sections 5 to 12 of Rule 4 shall apply to rehabilitation under this Rule. RULE 6 PRE-NEGOTIATED REHABILITATION Section 1. Pre-negotiated Rehabilitation Plan. - A debtor that foresees the impossibility of meeting its debts as they fall due may, by itself or jointly with any of its creditors, file a verified petition for the approval of a pre-negotiated rehabilitation plan. The petition shall comply with Section 2 of Rule 4 and be supported by an affidavit showing the written approval or endorsement of

creditors holding at least two-thirds (2/3) of the total liabilities of the debtor, including secured creditors holding more than fifty percent (50%) of the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the total unsecured claims of the debtor. Section 2. Issuance of Order. - If the court finds the petition sufficient in form and substance, it shall, not later than five (5) working days from the filing of the petition, issue an order which shall: (a) Identify the debtor, its principal business or activity/ies and its principal place of business; (b) Direct the publication of the order in a newspaper of general circulation once a week for at least two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of its issuance; (c) Direct the service by personal delivery of a copy of the petition on each creditor who is not a petitioner holding at least five percent (5%) of the total liabilities of the debtor, as determined in the schedule attached to the petition, within three (3) days; (d) Direct the petitioner to furnish a copy of the petition and its annexes, as well as the stay order, to the relevant regulatory agency; (e) State that copies of the petition and the rehabilitation plan are available for examination and copying by any interested party; (f) Direct creditors and other parties interested (including the Securities and Exchange Commission and the relevant regulatory agencies such as, but not limited to, the Bangko Sentral ng Pilipinas, the Insurance Commission, the National Telecommunications Commission, the Housing and Land Use Regulatory Board and the Energy Regulatory Commission) in opposing the petition or rehabilitation plan to file their verified objections thereto or comments thereon within a period of not later than twenty (20) days from the second publication of the order, with a warning that failure to do so will bar them from participating in the proceedings; (g) Appoint the rehabilitation receiver named in the plan, unless the court finds that he is not qualified under these Rules in which case it may appoint a qualified rehabilitation receiver of its choice; (h) Stay enforcement of all claims, whether for money or otherwise and whether such enforcement is by court action or otherwise, against the debtor, its guarantors and persons not solidarily liable with the debtor; provided, that the stay order shall not cover claims against letters of credit and similar security arrangements issued by a third party to secure the payment of the debtor's obligations; provided further, that the stay order shall not cover foreclosure by a creditor of property not belonging to a

debtor under corporate rehabilitation; provided, however, that where the owner of such property sought to be foreclosed is also a guarantor or one who is not solidarily liable, said owner shall be entitled to be benefit of excussion as such guarantor; (i) Prohibit the debtor from selling, encumbering, transferring, or disposing in any manner any of its properties except in the ordinary course of business; (j) Prohibit the debtor from making any payment of its liabilities outstanding as of the date of filing of the petition; (k) Prohibit the debtor's suppliers of goods or services from withholding supply of goods and services in the ordinary course of business for as long as the debtor makes payments for the services and goods supplied after the issuance of the stay order; (l) Direct the payment in full of all administrative expenses incurred after the issuance of the stay order; and (m) Direct the payment of new loans or other forms of credit accommodations obtained for the rehabilitation of the debtor with prior court approval. Section 3. Approval of Plan. - Within ten (10) days from the date of the second publication of the order referred to in Section 2 of this Rule, the court shall approve the rehabilitation plan unless a creditor or other interested party submits a verified objection to it in accordance with the next succeeding section. Section 4. Objection to Petition or Rehabilitation Plan. - Any creditor or other interested party may submit to the court a verified objection to the petition or the rehabilitation plan. The objection shall be limited to the following: (a) The petition or the rehabilitation plan or their attachments contain material omissions or are materially false or misleading; (b) The terms of rehabilitation are unattainable; or (c) The approval or endorsement of creditors required under Section 1 of this Rule has not been obtained Copies of any objection to the petition or the rehabilitation plan shall be served on the petitioning debtor and/or creditors. Section 5. Hearing on Objections. - The court shall set the case for hearing not earlier than ten (10) days and no longer than twenty (20) days from the date of the second publication of the order mentioned in Section 2 of this Rule on the objections is in accordance with the immediately preceding section, it shall direct the petitioner to cure the defect within a period fifteen (15) days from receipt of the order.

Section 6. Period for Approval of Rehabilitation Plan. - The court shall decide the petition not later than one hundred twenty (120) days from the date of the filing of the petition. If the court fails to do so within said period, the rehabilitation plan shall be deemed approved. Section 7. Effects of Approval of Rehabilitation Plan. - Approval of the rehabilitation plan under this Rule shall have the same legal effect as approval of a rehabilitation plan under Section 20 of Rule 3. Section 8. Revocation of Approved Rehabilitation Plan. - Not later than thirty (30) days from the approval of a rehabilitation plan under this Rule, the plan may, upon motion and after notice and hearing, be revoked on the ground that the approval was secured by fraud or that the petitioner has failed to cure the defect ordered by the court pursuant to Section 5 of this Rule. Section 9. Effect of Rule on Pending Petitions. - Any pending petition for rehabilitation that has not undergone the initial hearing prescribed under the Interim Rules of Procedure for Corporate Rehabilitation at the time of the effectivity of these Rules may be converted into a rehabilitation proceeding under this Rule. RULE 7 RECOGNITION OF FOREIGN PROCEEDINGS Section 1. Scope of Application. - This Rule applies where (a) assistance is sought in a Philippine court by a foreign court or a foreign representative in connection with a foreign proceeding; (b) assistance is sought in a foreign State in connection with a domestic proceeding governed by these Rules; or (c) a foreign proceeding and a domestic proceeding are concurrently taking place. The sole fact that a petition is filed pursuant to this Rule does not subject the foreign representative or the foreign assets and affairs of the debtor to the jurisdiction of the local courts for any purpose other than the petition. Section 2. Non-Recognition of Foreign Proceeding. - Nothing in this Rule prevents the court from refusing to take an action governed by this Rule if (a) the action would be manifestly contrary to the public policy of the Philippines; and (b) if the court finds that the country of which the petitioner is a national does not grant recognition to a Philippine rehabilitation proceeding in a manner substantially in accordance with this Rule. Section 3. Petition for Recognition of Foreign Proceeding. - A foreign representative may apply with the Regional Trial Court where the debtor resides for recognition of the foreign proceeding in which the foreign representative has been appointed. A petition for recognition shall be accompanied by:

(a) A certified copy of the decision commencing the foreign proceeding and appointing the foreign representative; or (b) A certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or (c) In the absence of evidence referred to in subparagraph (a) and (b), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative. Section 4. Recognition of Foreign Proceeding. - A foreign proceeding shall be recognized if: (a) The proceeding is a foreign proceeding as defined herein; (b) The person or body applying for recognition is a foreign representative as defined herein; and (c) The petition meets the requirements of Section 3 of this Rule; Section 5. Period to Recognize Foreign Proceeding. - A petition for recognition of a foreign proceeding shall be decided within thirty (30) days from the filing thereof. Section 6. Notification to Court. - From the time of filing the petition for recognition f the foreign proceeding, the foreign representative shall inform the court promptly of: (a) Any substantial change in the status of the foreign proceeding or the status of the foreign representative's appointment; and (b) Any other foreign proceeding regarding the same debtor that becomes known to the foreign representative. Section 7. Provisional Relief that May be Granted upon Application for Recognition of Foreign Proceeding. - From the time of filing a petition for recognition until the same is decided upon, the court may, upon motion of the foreign representative where relief is urgently needed to protect the assets of the debtor or the interests of the creditors, grant relief of a provisional nature, including: (a) Staying execution against the debtor's assets; (b) Entrusting the administration or realization of all or part of the debtor's assets located in the Philippines to the foreign representative or another person designated by the court in order to protect and preserve the value of assets that, by their nature or because of other circumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; (c) Any relief mentioned in Section 9(a)(1), (2) and (7) of this Rule.

Section 8. Effects of Recognition of Foreign Proceeding. - Upon recognition of a foreign proceeding: (a) Commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities is stayed; provided, that such stay does not affect the right to commence individual actions or proceedings to the extent necessary to preserve a claim against the debtor. (b) Execution against the debtor's assets is stayed; and (c) The right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended. Section 9. Relief That May be Granted After Recognition of Foreign Proceeding. (a) Upon recognition of a foreign proceeding, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, upon motion of the foreign representative, grant any appropriate relief including: (1) Staying the commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities to the extent they have not been stayed under Section 8(a) of this Rule; (2) Staying execution against the debtor's assets to the extent it has not been stayed under Section 8(b) of this Rule; (3) Suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under Section 8(c) of this Rule; (4) Providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities; (5) Entrusting the administration or realization of all or part of the debtor's assets located in the Philippines to the foreign representative or another person designated by the court; (6) Extending the relief granted under Section 7 of this Rule; (7) Granting any additional relief that may be available to the rehabilitation receiver under these laws. (b) Upon recognition of a foreign proceeding, the court may, at the request of the foreign representative, entrust the distribution of all or part of the debtor's assets located in the Philippines to the foreign representative or another person designated by the court; provided that the court is satisfied that the interests of local creditors are adequately protected. Section 10. Protection of Creditors and Other Interested Persons. -

(a) In granting or denying relief under this Rule or in modifying or terminating the relief under paragraph (c) of this Section, the court must be satisfied that the interests of the creditors and other interested persons, including the debtor, are adequately protected. (b) The court may subject the relief granted under Section 7 or Section 9. Of this Rule to conditions it considers appropriate. (c) The court may, upon motion of the foreign representative or a person affected by the relief granted under Section 7 or Section 9 of this Rule, or on its own motion, modify or terminate such relief. Section 11. Actions to Avoid Acts Detrimental to Creditors. - Upon recognition of a foreign proceeding, the foreign representative acquires the standing to initiate actions to avoid or otherwise render ineffective acts detrimental to creditors that are available under these Rules. Section 12. Intervention by Foreign Representative in Philippine Proceedings. Upon recognition of a foreign proceeding, the foreign representative may intervene in any action or proceeding in the Philippines in which the debtor is a party. Section 13. Cooperation and Direct Communication with Foreign Courts and Foreign Representatives. - In matters covered by this Rule, the court shall cooperate to the maximum extent possible with foreign courts or foreign representatives. The court is entitled to communicate directly with, or request information or assistance directly from, foreign courts or foreign representatives. Section 14. Forms of Cooperation. - Cooperation may be implemented by any appropriate means, including but not limited to the following: (a) Appointment of a person or body to act at the discretion of the court; (b) Communication of information by any means considered appropriate by the court; (c) Coordination of the administration and supervision of the debtor's assets and affairs; (d) Approval or implementation by courts of agreements concerning the coordination of proceedings; (e) Coordination of concurrent proceedings regarding the same debtor; (f) Suspension of proceedings against the debtor;

(g) Limiting the relief of assets that should be administered in a foreign proceeding pending in a jurisdiction other than the place where the debtor has its principal place of business (foreign non-main proceeding) or information required in that proceeding; and (h) Implementation of rehabilitation or re-organization plan for the debtor. Nothing in this Rule limits the power of the court to provide additional assistance to the foreign representative under other applicable laws. Section 15. Commencement of Local Proceeding after Recognition of Foreign Proceeding. - After the recognition of a foreign proceeding, a local proceeding under these Rules may be commenced only if the debtor is doing business in the Philippines, the effects of the proceedings shall be restricted to the assets of the debtor located in the country and, to the extent necessary to implement cooperation and coordination under Sections 13 and 14 of this Rule, to the other assets of the debtor that, under local laws, must be administered in that proceeding. Section 16. Local and Foreign Proceedings. - Where a foreign proceeding and a local proceeding are taking place concurrently regarding the same debtor, the court shall seek cooperation and coordination under Section 13 and 14 of this Rule. Any relief granted to the foreign proceeding must be made consistent with the relief granted in the local proceeding. RULE 8 PROCEDURAL REMEDIES Section 1. Motion for Reconsideration. - A party may file a motion for reconsideration of any order issued by the court prior to the approval of the rehabilitation plan. No relief can be extended to the party aggrieved by the court's order on the motion through a special civil action for certiorari under Rule 65 of the rules of Court. Such order can only be elevated to the Court of Appeals as an assigned error in the petition for review of the decision or order approving or disapproving the rehabilitation plan. An order issued after the approval of the rehabilitation plan can de reviewed only through a special civil action for certiorari under Rule 65 of the Rules of Court. Section 2. Review of Decision or Order on Rehabilitation Plan. - an order approving or disapproving a rehabilitation plan can only be reviewed through a petition for review to the Court of Appeals under Rule 43 of the Rules of Court within fifteen (15) days from notice of the decision or order. RULE 9 FINAL PROVISIONS

Section 1. Severability. - If any provision or section of these Rules is held invalid, the other provisions or sections shall not be affected thereby. Section 2. Transitory Provision. - Unless the court orders otherwise to prevent manifest injustice, any pending petition for rehabilitation that has not undergone the initial hearing prescribed under the Interim Rules of Procedure for Corporate Rehabilitation at the time of the effectivity of these Rules shall be governed by these rules. Section 3. Effectivity. - These Rules shall take affect on 16 January 2009 following its publication in two (2) newspapers of general circulation in the Philippines. ANNEX "A" AFFIDAVIT OF GENERAL FINANCIAL CONDITION (1) Are you an officer of the debtor referred to in these proceedings? (2) What is your full name and what position do you hold in the debtor? (3) What is the full name of the debtor and what is the address of its head office? (4) When was it formed or incorporated? (5) When did the debtor commence business? (6) What is the nature of its business? What is the market share of the debtor in the industry in which it is engaged? (7) Who are the parties, members, or stockholders? How many employees? (8) What is the capital of the debtor? (9) What is the capital contribution and what is the amount of the capital, paid and unpaid, of each of the partners or shareholders? (10) Do any of these people hold the shares in trust for others? (11) Who are the directors and officers of the debtors? (12) Has the debtor any subsidiary corporation? If so, give particulars? (13) Has the debtor properly maintained its books and are they updated? (14) Were the books audited annually? (15) If so, what is the name of the auditor and when was the last audited statement drawn up? (16) Have all proper returns been made to the various government agencies requiring same? (17) When did the debtor first become aware of its problems? (18) Has the debtor within the twelve months preceding the filing of the petition:

(a) made any payments, returned any goods or delivered any property to any of its creditors, except in the normal course of business? (b) executed any mortgage, pledge, or security over any of its properties in favor of any creditor? (c) transferred or disposed of any of its properties in payment of any debt? (d) sold, disposed of, or removed any of its property except in the ordinary course of business? (e) sold any merchandise at less than fair market value or purchased merchandise or services at more than fair market value? (f) made or been a party to any settlement of property in favor of any person? If, so, give particulars. (19) Has the debtor recorded all sales or dispositions of assets? (20) What were the sales for the last three years and what percentage of the sales represented the profit or markup? (21) What were the profits or losses for the debtor for the last three years? (22) What are the causes of the problems of the debtor? Please provide particulars? (23) When did you first notice these problems and what actions did the debtor take to rectify them? (24) How much do you estimate is needed to rehabilitate the debtor? (25) Has any person expressed interest in investing new money into the debtor? (26) Are there any pending and threatened legal actions against the debtor? If so, please provide particulars. (27) Has the debtor discussed any restructuring or repayment plan with any of the creditors? Please provide status and details. (28) Has any creditor expressed interest in restructuring the debts of the debtor? If so, please give particulars. (29) Have employees' wages and salaries been kept current? If not, how much are in arrears and what time period do the arrears represent? (30) Have obligation to the government and its agencies been kept current? If not, how much are in arrears and what time period do the arrears represent? December 2, 2008 THE NEW CENTRAL BANK ACT [REPUBLIC ACT No. 7653] CHAPTER I ESTABLISHMENT AND ORGANIZATION OF THE BANGKO SENTRAL NG PILIPINAS ARTICLE I CREATION, RESPONSIBILITIES AND CORPORATE POWERS OF THE BANGKO SENTRAL Section 1. Declaration of Policy. - The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy. Section 2. Creation of the Bangko Sentral. - There is hereby established an independent central monetary authority, which shall be a body corporate known as the Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral. The capital of the Bangko Sentral shall be Fifty billion pesos (P50,000,000,000), to be fully subscribed by the Government of the Republic, hereafter referred to as the Government, Ten billion pesos (P10,000,000,000) of which shall be fully paid for by the Government upon the effectivity of this Act and the balance to be paid for within a period of two (2) years from the effectivity of this Act in such manner and form as the Government, through the Secretary of Finance and the Secretary of Budget and Management, may thereafter determine. Section 3. Responsibility and Primary Objective. - The Bangko Sentral shall provide policy directions in the areas of money, banking, and credit. It shall have supervision over the operations of banks and exercise such regulatory powers as provided in this Act and other pertinent laws over the operations of finance companies and non-bank financial institutions performing quasi-banking functions, hereafter referred to as quasi-banks, and institutions performing similar functions.

The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced and sustainable growth of the economy. It shall also promote and maintain monetary stability and the convertibility of the peso. Section 4. Place of Business. - The Bangko Sentral shall have its principal place of business in Metro Manila, but may maintain branches, agencies and correspondents in such other places as the proper conduct of its business may require. Section 5. Corporate Powers. - The Bangko Sentral is hereby authorized to adopt, alter, and use a corporate seal which shall be judicially noticed; to enter into contracts; to lease or own real and personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes of this Act. The Bangko Sentral may acquire and hold such assets and incur such liabilities in connection with its operations authorized by the provisions of this Act, or as are essential to the proper conduct of such operations. The Bangko Sentral may compromise, condone or release, in whole or in part, any claim of or settled liability to the Bangko Sentral, regardless of the amount involved, under such terms and conditions as may be prescribed by the Monetary Board to protect the interests of the Bangko Sentral. ARTICLE II THE MONETARY BOARD Section 6. Composition of the Monetary Board. - The powers and functions of the Bangko Sentral shall be exercised by the Bangko Sentral Monetary Board, hereafter referred to as the Monetary Board, composed of seven (7) members appointed by the President of the Philippines for a term of six (6) years. The seven (7) members are: (a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board. The Governor of the Bangko Sentral shall be head of a department and his appointment shall be subject to confirmation by the Commission on Appointments. Whenever the Governor is unable to attend a meeting of the Board, he shall designate a Deputy Governor to act as his alternate: Provided, That in such event, the Monetary Board shall designate one of its members as acting Chairman; (b) a member of the Cabinet to be designated by the President of the Philippines. Whenever the designated Cabinet Member is unable to attend a meeting of the Board, he shall designate an Undersecretary in his Department to attend as his alternate; and

(c) five (5) members who shall come from the private sector, all of whom shall serve full-time: Provided, however, That of the members first appointed under the provisions of this subsection, three (3) shall have a term of six (6) years, and the other two (2), three (3) years. No member of the Monetary Board may be reappointed more than once. Section 7. Vacancies. - Any vacancy in the Monetary Board created by the death, resignation, or removal of any member shall be filled by the appointment of a new member to complete the unexpired period of the term of the member concerned. Section 8. Qualifications. - The members of the Monetary Board must be natural-born citizens of the Philippines, at least thirty-five (35) years of age, with the exception of the Governor who should at least be forty (40) years of age, of good moral character, of unquestionable integrity, of known probity and patriotism, and with recognized competence in social and economic disciplines. Section 9. Disqualifications. - In addition to the disqualifications imposed by Republic Act No. 6713, a member of the Monetary Board is disqualified from being a director, officer, employee, consultant, lawyer, agent or stockholder of any bank, quasi-bank or any other institution which is subject to supervision or examination by the Bangko Sentral, in which case such member shall resign from, and divest himself of any and all interests in such institution before assumption of office as member of the Monetary Board. The members of the Monetary Board coming from the private sector shall not hold any other public office or public employment during their tenure. No person shall be a member of the Monetary Board if he has been connected directly with any multilateral banking or financial institution or has a substantial interest in any private bank in the Philippines, within one (1) year prior to his appointment; likewise, no member of the Monetary Board shall be employed in any such institution within two (2) years after the expiration of his term except when he serves as an official representative of the Philippine Government to such institution. Section 10. Removal. - The President may remove any member of the Monetary Board for any of the following reasons: (a) If the member is subsequently disqualified under the provisions of Section 8 of this Act; or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties and responsibilities and such incapacity has lasted for more than six (6) months; or (c) If the member is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to the aims and interests of the Bangko Sentral; or (d) If the member no longer possesses the qualifications specified in Section 8 of this Act. Section 11. Meetings. - The Monetary Board shall meet at least once a week. The Board may be called to a meeting by the Governor of the Bangko Sentral or by two (2) other members of the Board. The presence of four (4) members shall constitute a quorum: Provided, That in all cases the Governor or his duly designated alternate shall be among the four (4). Unless otherwise provided in this Act, all decisions of the Monetary Board shall require the concurrence of at least four (4) members. The Bangko Sentral shall maintain and preserve a complete record of the proceedings and deliberations of the Monetary Board, including the tapes and transcripts of the stenographic notes, either in their original form or in microfilm. Section 12. Attendance of the Deputy Governors. - The Deputy Governors may attend the meetings of the Monetary Board with the right to be heard. Section 13. Salary. - The salary of the Governor and the members of the Monetary Board from the private sector shall be fixed by the President of the Philippines at a sum commensurate to the importance and responsibility attached to the position. Section 14. Withdrawal of Persons Having a Personal Interest. - In addition to the requirements of Republic Act No. 6713, any member of the Monetary Board with personal or pecuniary interest in any matter in the agenda of the Monetary Board shall disclose his interest to the Board and shall retire from the meeting when the matter is taken up. The decision taken on the matter shall be made public. The minutes shall reflect the disclosure made and the retirement of the member concerned from the meeting. Section 15. Exercise of Authority. - In the exercise of its authority, the Monetary Board shall: (a) issue rules and regulations it considers necessary for the effective discharge of the responsibilities and exercise of the powers vested upon the Monetary Board and the

Bangko Sentral. The rules and regulations issued shall be reported to the President and the Congress within fifteen (15) days from the date of their issuance; (b) direct the management, operations, and administration of the Bangko Sentral, reorganize its personnel, and issue such rules and regulations as it may deem necessary or convenient for this purpose. The legal units of the Bangko Sentral shall be under the exclusive supervision and control of the Monetary Board; (c) establish a human resource management system which shall govern the selection, hiring, appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to establish professionalism and excellence at all levels of the Bangko Sentral in accordance with sound principles of management. A compensation structure, based on job evaluation studies and wage surveys and subject to the Board's approval, shall be instituted as an integral component of the Bangko Sentral's human resource development program: Provided, That the Monetary Board shall make its own system conform as closely as possible with the principles provided for under Republic Act No. 6758: Provided, however, That compensation and wage structure of employees whose positions fall under salary grade 19 and below shall be in accordance with the rates prescribed under Republic Act No. 6758. On the recommendation of the Governor, appoint, fix the remunerations and other emoluments, and remove personnel of the Bangko Sentral, subject to pertinent civil service laws: Provided, That the Monetary Board shall have exclusive and final authority to promote, transfer, assign, or reassign personnel of the Bangko Sentral and these personnel actions are deemed made in the interest of the service and not disciplinary: Provided, further, That the Monetary Board may delegate such authority to the Governor under such guidelines as it may determine. (d) adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are in the interest of the effective administration and operations of the Bangko Sentral in accordance with applicable laws and regulations; and (e) indemnify its members and other officials of the Bangko Sentral, including personnel of the departments performing supervision and examination functions against all costs and expenses reasonably incurred by such persons in connection with any civil or criminal action, suit or proceedings to which he may be, or is, made a party by reason of the performance of his functions or duties, unless he is finally adjudged in such action or proceeding to be liable for negligence or misconduct.

In the event of a settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Bangko Sentral is advised by external counsel that the person to be indemnified did not commit any negligence or misconduct. The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Bangko Sentral in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the member, officer, or employee to repay the amount advanced should it ultimately be determined by the Monetary Board that he is not entitled to be indemnified as provided in this subsection. Section 16. Responsibility. - Members of the Monetary Board, officials, examiners, and employees of the Bangko Sentral who willfully violate this Act or who are guilty of negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the performance of his duties shall be held liable for any loss or injury suffered by the Bangko Sentral or other banking institutions as a result of such violation, negligence, abuse, malfeasance, misfeasance or failure to exercise extraordinary diligence. Similar responsibility shall apply to members, officers, and employees of the Bangko Sentral for: (1) the disclosure of any information of a confidential nature, or any information on the discussions or resolutions of the Monetary Board, or about the confidential operations of the Bangko Sentral, unless the disclosure is in connection with the performance of official functions with the Bangko Sentral, or is with prior authorization of the Monetary Board or the Governor; or (2) the use of such information for personal gain or to the detriment of the Government, the Bangko Sentral or third parties: Provided, however, That any data or information required to be submitted to the President and/or the Congress, or to be published under the provisions of this Act shall not be considered confidential. ARTICLE III THE GOVERNOR AND DEPUTY GOVERNORS OF THE BANGKO SENTRAL Section 17. Powers and Duties of the Governor. - The Governor shall be the chief executive officer of the Bangko Sentral. His powers and duties shall be to: (a) prepare the agenda for the meetings of the Monetary Board and to submit for the consideration of the Board the policies and measures which he believes to be necessary to carry out the purposes and provisions of this Act; (b) execute and administer the policies and measures approved by the Monetary Board;

(c) direct and supervise the operations and internal administration of the Bangko Sentral. The Governor may delegate certain of his administrative responsibilities to other officers or may assign specific tasks or responsibilities to any full-time member of the Monetary Board without additional remuneration or allowance whenever he may deem fit or subject to such rules and regulations as the Monetary Board may prescribe; (d) appoint and fix the remunerations and other emoluments of personnel below the rank of a department head in accordance with the position and compensation plans approved by the Monetary Board, as well as to impose disciplinary measures upon personnel of the Bangko Sentral, subject to the provisions of Section 15(c) of this Act: Provided, That removal of personnel shall be with the approval of the Monetary Board; (e) render opinions, decisions, or rulings, which shall be final and executory until reversed or modified by the Monetary Board, on matters regarding application or enforcement of laws pertaining to institutions supervised by the Bangko Sentral and laws pertaining to quasi-banks, as well as regulations, policies or instructions issued by the Monetary Board, and the implementation thereof; and (f) exercise such other powers as may be vested in him by the Monetary Board. Section 18. Representation of the Monetary Board and the Bangko Sentral. The Governor of the Bangko Sentral shall be the principal representative of the Monetary Board and of the Bangko Sentral and, in such capacity and in accordance with the instructions of the Monetary Board, he shall be empowered to: (a) represent the Monetary Board and the Bangko Sentral in all dealings with other offices, agencies and instrumentalities of the Government and all other persons or entities, public or private, whether domestic, foreign or international; (b) sign contracts entered into by the Bangko Sentral, notes and securities issued by the Bangko Sentral, all reports, balance sheets, profit and loss statements, correspondence and other documents of the Bangko Sentral. The signature of the Governor may be in facsimile whenever appropriate; (c) represent the Bangko Sentral, either personally or through counsel, including private counsel, as may be authorized by the Monetary Board, in any legal proceedings, action or specialized legal studies; and (d) delegate his power to represent the Bangko Sentral, as provided in subsections (a), (b) and (c) of this section, to other officers upon his own responsibility: Provided, however, That in order to preserve the integrity and the prestige of his office, the Governor of the Bangko Sentral may choose not to participate in

preliminary discussions with any multilateral banking or financial institution on any negotiations for the Government within or outside the Philippines. During the negotiations, he may instead be represented by a permanent negotiator. Section 19. Authority of the Governor in Emergencies. - In case of emergencies where time is sufficient to call a meeting of the Monetary Board, the Governor of the Bangko Sentral, with the concurrence of two (2) other members of the Monetary Board, may decide any matter or take any action within the authority of the Board. The Governor shall submit a report to the President and Congress within seventy-two (72) hours after the action has been taken. At the soonest possible time, the Governor shall call a meeting of the Monetary Board to submit his action for ratification. Section 20. Outside Interests of the Governor and the Full-time Members of the Board. - The Governor of the Bangko Sentral and the full-time members of the Board shall limit their professional activities to those pertaining directly to their positions with the Bangko Sentral. Accordingly, they may not accept any other employment, whether public or private, remunerated or ad honorem, with the exception of positions in eleemosynary, civic, cultural or religious organizations or whenever, by designation of the President, the Governor or the full-time member is tasked to represent the interest of the Government or other government agencies in matters connected with or affecting the economy or the financial system of the country. Section 21. Deputy Governors. - The Governor of the Bangko Sentral, with the approval of the Monetary Board, shall appoint not more than three (3) Deputy Governors who shall perform duties as may be assigned to them by the Governor and the Board. In the absence of the Governor, a Deputy Governor designated by the Governor shall act as chief executive of the Bangko Sentral and shall exercise the powers and perform the duties of the Governor. Whenever the Government is unable to attend meetings of government boards or councils in which he is an ex officio member pursuant to provisions of special laws, a Deputy Governor as may be designated by the Governor shall be vested with authority to participate and exercise the right to vote in such meetings. ARTICLE IV OPERATIONS OF THE BANGKO SENTRAL Section 22. Research and Statistics. - The Bangko Sentral shall prepare data and conduct economic research for the guidance of the Monetary Board in the formulation and implementation of its policies. Such data shall include, among others,

forecasts of the balance of payments of the Philippines, statistics on the monthly movement of the monetary aggregates and of prices and other statistical series and economic studies useful for the formulation and analysis of monetary, banking, credit and exchange policies. Section 23. Authority to Obtain Data and Information. - The Bangko Sentral shall have the authority to request from government offices and instrumentalities, or government-owned or controlled corporations, any data which it may require for the proper discharge of its functions and responsibilities. The Bangko Sentral through the Governor or in his absence, a duly authorized representative shall have the power to issue a subpoena for the production of the books and records for the aforesaid purpose. Those who refuse the subpoena without justifiable cause, or who refuse to supply the bank with data requested or required, shall be subject to punishment for contempt in accordance with the provisions of the Rules of Court. Data on individual firms, other than banks, gathered by the Department of Economic Research and other departments or units of the Bangko Sentral shall not be made available to any person or entity outside of the Bangko Sentral whether public or private except under order of the court or under such conditions as may be prescribed by the Monetary Board: Provided, however, That the collective data on firms may be released to interested persons or entities: Provided, finally, That in the case of data on banks, the provisions of Section 27 of this Act shall apply. Section 24. Training of Technical Personnel. - The Bangko Sentral shall promote and sponsor the training of technical personnel in the field of money and banking. Toward this end, the Bangko Sentral is hereby authorized to defray the costs of study, at home or abroad, of qualified employees of the Bangko Sentral, of promising university graduates or of any other qualified persons who shall be determined by proper competitive examinations. The Monetary Board shall prescribe rules and regulations to govern the training program of the Bangko Sentral. Section 25. Supervision and Examination. - The Bangko Sentral shall have supervision over, and conduct periodic or special examinations of, banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities. For purposes of this section, a subsidiary means a corporation more than fifty percent (50%) of the voting stock of which is owned by a bank or quasi-bank and an affiliate means a corporation the voting stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or quasi-bank or which is related or

linked to such institution or intermediary through common stockholders or such other factors as may be determined by the Monetary Board. The department heads and the examiners of the supervising and/or examining departments are hereby authorized to administer oaths to any director, officer, or employee of any institution under their respective supervision or subject to their examination and to compel the presentation of all books, documents, papers or records necessary in their judgment to ascertain the facts relative to the true condition of any institution as well as the books and records of persons and entities relative to or in connection with the operations, activities or transactions of the institution under examination, subject to the provision of existing laws protecting or safeguarding the secrecy or confidentiality of bank deposits as well as investments of private persons, natural or juridical, in debt instruments issued by the Government. No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from examining any institution subject to supervision or examination by the Bangko Sentral, unless there is convincing proof that the action of the Bangko Sentral is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Bangko Sentral, in an amount to be fixed by the court. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section. Section 26. Bank Deposits and Investments. - Any director, officer or stockholder who, together with his related interest, contracts a loan or any form of financial accommodation from: (1) his bank; or (2) from a bank (a) which is a subsidiary of a bank holding company of which both his bank and the lending bank are subsidiaries or (b) in which a controlling proportion of the shares is owned by the same interest that owns a controlling proportion of the shares of his bank, in excess of five percent (5%) of the capital and surplus of the bank, or in the maximum amount permitted by law, whichever is lower, shall be required by the lending bank to waive the secrecy of his deposits of whatever nature in all banks in the Philippines. Any information obtained from an examination of his deposits shall be held strictly confidential and may be used by the examiners only in connection with their supervisory and examination responsibility or by the Bangko Sentral in an appropriate legal action it has initiated involving the deposit account. Section 27. Prohibitions. - In addition to the prohibitions found in Republic Act Nos. 3019 and 6713, personnel of the Bangko Sentral are hereby prohibited from:

(a) being an officer, director, lawyer or agent, employee, consultant or stockholder, directly or indirectly, of any institution subject to supervision or examination by the Bangko Sentral, except non-stock savings and loan associations and provident funds organized exclusively for employees of the Bangko Sentral, and except as otherwise provided in this Act; (b) directly or indirectly requesting or receiving any gift, present or pecuniary or material benefit for himself or another, from any institution subject to supervision or examination by the Bangko Sentral; (c) revealing in any manner, except under orders of the court, the Congress or any government office or agency authorized by law, or under such conditions as may be prescribed by the Monetary Board, information relating to the condition or business of any institution. This prohibition shall not be held to apply to the giving of information to the Monetary Board or the Governor of the Bangko Sentral, or to any person authorized by either of them, in writing, to receive such information; and (d) borrowing from any institution subject to supervision or examination by the Bangko Sentral shall be prohibited unless said borrowings are adequately secured, fully disclosed to the Monetary Board, and shall be subject to such further rules and regulations as the Monetary Board may prescribe: Provided, however, That personnel of the supervising and examining departments are prohibited from borrowing from a bank under their supervision or examination. Section 28. Examination and Fees. - The supervising and examining department head, personally or by deputy, shall examine the books of every banking institution once in every twelve (12) months, and at such other times as the Monetary Board by an affirmative vote of five (5) members, may deem expedient and to make a report on the same to the Monetary Board: Provided, That there shall be an interval of at least twelve (12) months between annual examinations. The bank concerned shall afford to the head of the appropriate supervising and examining departments and to his authorized deputies full opportunity to examine its books, cash and available assets and general condition at any time during banking hours when requested to do so by the Bangko Sentral: Provided, however, That none of the reports and other papers relative to such examinations shall be open to inspection by the public except insofar as such publicity is incidental to the proceedings hereinafter authorized or is necessary for the prosecution of violations in connection with the business of such institutions.

Banking and quasi-banking institutions which are subject to examination by the Bangko Sentral shall pay to the Bangko Sentral, within the first thirty (30) days of each year, an annual fee in an amount equal to a percentage as may be prescribed by the Monetary Board of its average total assets during the preceding year as shown on its end-of-month balance sheets, after deducting cash on hand and amounts due from banks, including the Bangko Sentral and banks abroad. Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability. The conservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank. The conservator should be competent and knowledgeable in bank operations and management. The conservatorship shall not exceed one (1) year. The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in twelve (12) equal monthly payments: Provided, That, if at any time within one-year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receive the balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance. The Monetary Board may appoint a conservator connected with the Bangko Sentral, in which case he shall not be entitled to receive any remuneration or emolument from the Bangko Sentral during the conservatorship. The expenses attendant to the conservatorship shall be borne by the bank or quasi-bank concerned. The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. The conservatorship shall likewise be terminated should the Monetary Board, on the basis of the report of the conservator or of its own findings, determine that the continuance in business of the institution would involve probable

loss to its depositors or creditors, in which case the provisions of Section 30 shall apply. Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank: (a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community; (b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or (c) cannot continue in business without involving probable losses to its depositors or creditors; or (d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution. For a quasi-bank, any person of recognized competence in banking or finance may be designed as receiver. The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative investments. The receiver shall determine as soon as possible, but not later than ninety (90) days from take over, whether the institution may be rehabilitated or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any determination for the resumption of business of the institution shall be subject to prior approval of the Monetary Board. If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings and

direct the receiver to proceed with the liquidation of the institution. The receiver shall: (1) file ex parte with the proper regional trial court, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings from the assets of the institution. (2) convert the assets of the institutions to money, dispose of the same to creditors and other parties, for the purpose of paying the debts of such institution in accordance with the rules on concurrence and preference of credit under the Civil Code of the Philippines and he may, in the name of the institution, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of, or defend any action against, the institution. The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver and shall, from the moment the institution was placed under such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution. The actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver. Section 31. Distribution of Assets. - In case of liquidation of a bank or quasibank, after payment of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the court, the receiver shall pay the debts of such

institution, under order of the court, in accordance with the rules on concurrence and preference of credit as provided in the Civil Code. Section 32. Disposition of Revenues and Earnings. - All revenues and earnings realized by the receiver in winding up the affairs and administering the assets of any bank or quasi-bank within the purview of this Act shall be used to pay the costs, fees and expenses mentioned in the preceding section, salaries of such personnel whose employment is rendered necessary in the discharge of the liquidation together with other additional expenses caused thereby. The balance of revenues and earnings, after the payment of all said expenses, shall form part of the assets available for payment to creditors. Section 33. Disposition of Banking Franchise. - The Bangko Sentral may, if public interest so requires, award to an institution, upon such terms and conditions as the Monetary Board may approve, the banking franchise of a bank under liquidation to operate in the area where said bank or its branches were previously operating: Provided, That whatever proceeds may be realized from such award shall be subject to the appropriate exclusive disposition of the Monetary Board. Section 34. Refusal to Make Reports or Permit Examination. - Any officer, owner, agent, manager, director or officer-in-charge of any institution subject to the supervision or examination by the Bangko Sentral within the purview of this Act who, being required in writing by the Monetary Board or by the head of the supervising and examining department willfully refuses to file the required report or permit any lawful examination into the affairs of such institution shall be punished by a fine of not less than Fifty thousand pesos (P50,000) nor more than One hundred thousand pesos (P100,000) or by imprisonment of not less than one (1) year nor more than five (5) years, or both, in the discretion of the court. Section 35. False Statement. - The willful making of a false or misleading statement on a material fact to the Monetary Board or to the examiners of the Bangko Sentral shall be punished by a fine of not less than One hundred thousand pesos (P100,000) nor more than Two hundred thousand pesos (P200,000), or by imprisonment of not more than (5) years, or both, at the discretion of the court. Section 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules, Regulations, Orders or Instructions. - Whenever a bank or quasi-bank, or whenever any person or entity willfully violates this Act or other pertinent banking laws being enforced or implemented by the Bangko Sentral or any order, instruction, rule or regulation issued by the Monetary Board, the person or persons responsible for such violation shall unless otherwise provided in this Act

be punished by a fine of not less than Fifty thousand pesos (P50,000) nor more than Two hundred thousand pesos (P200,000) or by imprisonment of not less than two (2) years nor more than ten (10) years, or both, at the discretion of the court. Whenever a bank or quasi-bank persists in carrying on its business in an unlawful or unsafe manner, the Board may, without prejudice to the penalties provided in the preceding paragraph of this section and the administrative sanctions provided in Section 37 of this Act, take action under Section 30 of this Act. Section 37. Administrative Sanctions on Banks and Quasi-banks. - Without prejudice to the criminal sanctions against the culpable persons provided in Sections 34, 35, and 36 of this Act, the Monetary Board may, at its discretion, impose upon any bank or quasi-bank, their directors and/or officers, for any willful violation of its charter or by-laws, willful delay in the submission of reports or publications thereof as required by law, rules and regulations; any refusal to permit examination into the affairs of the institution; any willful making of a false or misleading statement to the Board or the appropriate supervising and examining department or its examiners; any willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor; or any commission of irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Monetary Board, the following administrative sanctions, whenever applicable: (a) fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed Thirty thousand pesos (P30,000) a day for each violation, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the bank or quasi-bank; (b) suspension of rediscounting privileges or access to Bangko Sentral credit facilities; (c) suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments; (d) suspension of interbank clearing privileges; and/or (e) revocation of quasi-banking license. Resignation or termination from office shall not exempt such director or officer from administrative or criminal sanctions. The Monetary Board may, whenever warranted by circumstances, preventively suspend any director or officer of a bank or quasi-bank pending an investigation: Provided, That should the case be not finally decided by the Bangko Sentral within a period of one hundred twenty (120) days after the date of suspension, said director or officer shall be reinstated in his position: Provided, further, That when the delay in the

disposition of the case is due to the fault, negligence or petition of the director or officer, the period of delay shall not be counted in computing the period of suspension herein provided. The above administrative sanctions need not be applied in the order of their severity. Whether or not there is an administrative proceeding, if the institution and/or the directors and/or officers concerned continue with or otherwise persist in the commission of the indicated practice or violation, the Monetary Board may issue an order requiring the institution and/or the directors and/or officers concerned to cease and desist from the indicated practice or violation, and may further order that immediate action be taken to correct the conditions resulting from such practice or violation. The cease and desist order shall be immediately effective upon service on the respondents. The respondents shall be afforded an opportunity to defend their action in a hearing before the Monetary Board or any committee chaired by any Monetary Board member created for the purpose, upon request made by the respondents within five (5) days from their receipt of the order. If no such hearing is requested within said period, the order shall be final. If a hearing is conducted, all issues shall be determined on the basis of records, after which the Monetary Board may either reconsider or make final its order. The Governor is hereby authorized, at his discretion, to impose upon banking institutions, for any failure to comply with the requirements of law, Monetary Board regulations and policies, and/or instructions issued by the Monetary Board or by the Governor, fines not in excess of Ten thousand pesos (P10,000) a day for each violation, the imposition of which shall be final and executory until reversed, modified or lifted by the Monetary Board on appeal. Section 38. Operating Departments of the Bangko Sentral. - The Monetary Board shall, in accordance with its authority under this Act, determine and provide for such operating departments and other offices, including a public information office, of the Bangko Sentral as it deems convenient for the proper and efficient conduct of the operations and the accomplishment of the objectives of the Bangko Sentral. The functions and duties of such operating departments and other offices shall be determined by the Monetary Board. ARTICLE V REPORTS AND PUBLICATIONS

Section 39. Reports and Publications. - The Bangko Sentral shall publish a general balance sheet showing the volume and composition of its assets and liabilities as of the last working day of the month within sixty (60) days after the end of each month except for the month of December, which shall be submitted within ninety (90) days after the end hereof. The Monetary Board shall publish and submit the following reports to the President and to the Congress: (a) not later than ninety (90) days after the end of each quarter, an analysis of economic and financial developments, including the condition of net international reserves and monetary aggregates; (b) within ninety (90) days after the end of the year, the preceding year's budget and profit and loss statement of the Bangko Sentral showing in reasonable detail the result of its operations; (c) one hundred twenty (120) days after the end of each semester, a review of the state of the financial system; and (d) as soon as practicable, abnormal movements in monetary aggregates and the general price level, and, not later than seventy-two (72) hours after they are taken, remedial measures in response to such abnormal movements. Section 40. Annual Report. - Before the end of March of each year, the Bangko Sentral shall publish and submit to the President and the Congress an annual report on the condition of the Bangko Sentral including a review of the policies and measures adopted by the Monetary Board during the past year and an analysis of the economic and financial circumstances which gave rise to said policies and measures. The annual report shall also include a statement of the financial condition of the Bangko Sentral and a statistical appendix which shall present, as a minimum, the following data: (a) the monthly movement of monetary aggregates and their components; (b) the monthly movement of purchases and sales of foreign exchange and of the international reserves of the Bangko Sentral; (c) the balance of payments of the Philippines; (d) monthly indices of consumer prices and of import and export prices; (e) the monthly movement, in summary form, of exports and imports, by volume and value; (f) the monthly movement of the accounts of the Bangko Sentral and of other banks;

(g) the principal data on government receipts and expenditures and on the status of the public debt, both domestic and foreign; and (h) the texts of the major legal and administrative measures adopted by the Government and the Monetary Board during the year which relate to the functions or operations of the Bangko Sentral or of the financial system. The Bangko Sentral shall publish another version of the annual report in terms understandable to the layman. Failure to comply with the reportorial requirements pursuant to this article without justifiable reason as may be determined by the Monetary Board shall cause the withholding of the salary of the personnel concerned until the requirements are complied with. Section 41. Signatures on Statements. - The balance sheets and other financial statements of the Bangko Sentral shall be signed by the officers responsible for their preparation, by the Governor, and by the auditor of the Bangko Sentral. ARTICLE VI PROFITS, LOSSES, AND SPECIAL ACCOUNTS Section 42. Fiscal Year. - The fiscal year of the Bangko Sentral shall begin on January first and end on December thirty-first of each year. Section 43. Computation of Profits and Losses. - Within the first thirty (30) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. In the calculation of net profits, the Bangko Sentral shall make adequate allowance or establish adequate reserves for bad and doubtful accounts. Section 44. Distribution of Net Profits. - Within the first sixty (60) days following the end of each fiscal year, the Monetary Board shall determine and carry out the distribution of the net profits, in accordance with the following rule: Fifty percent (50%) of the net profits shall be carried to surplus and the remaining fifty percent (50%) shall revert back to the National Treasury, except as otherwise provided in the transitory provisions of this Act. Section 45. Revaluation Profits and Losses. - Profits or losses arising from any revaluation of the Bangko Sentral's net assets or liabilities in gold or foreign currencies with respect to the Philippine peso shall not be included in the computation of the annual profits and losses of the Bangko Sentral. Any profits or losses arising in this manner shall be offset by any amounts which, as a consequence of such revaluations, are owed by the Philippines to any international

or regional intergovernmental financial institution of which the Philippines is a member or are owed by these institutions to the Philippines. Any remaining profit or loss shall be carried in a special frozen account which shall be named "Revaluation of International Reserve" and the net balance of which shall appear either among the liabilities or among the assets of the Bangko Sentral, depending on whether the revaluations have produced net profits or net losses. The Revaluation of International Reserve account shall be neither credited nor debited for any purposes other than those specifically authorized in this section. Section 46. Suspense Accounts. - Sections 43 and 43-A of Republic Act No. 265, as amended, creating the Monetary Adjustment Account (MAA) and the Exchange Stabilization Adjustment Account (ESAA), respectively, are hereby repealed. Amounts outstanding as of the effective date of this Act based on these accounts shall continue to be for the account of the Central Bank and shall be governed by the transitory provisions of this Act. The Revaluation of International Reserve (RIR) account as of the effective date of this Act of the Central Bank shall continue to be for the account of the same entity and shall be governed by the provisions of Section 44 of Republic Act No. 265, as amended, until otherwise provided for in accordance with the transitory provisions of this Act. ARTICLE VII THE AUDITOR Section 47. Appointment and Personnel. - The Chairman of the Commission on Audit shall act as the ex officio auditor of the Bangko Sentral and, as such, he is empowered and authorized to appoint a representative who shall be the auditor of the Bangko Sentral and, in accordance with law, fix his salary, and to appoint and fix salaries and number of personnel to assist said representative in his work. The salaries and other emoluments shall be paid by the Commission. The auditor of the Bangko Sentral and personnel under him may be removed only by the Chairman of the Commission. The representative of the Chairman of the Commission must be a certified public accountant with at least ten (10) years experience as such. No relative of any member of the Monetary Board or the Chairman of the Commission within the sixth degree of consanguinity or affinity shall be appointed such representative. CHAPTER II THE BANGKO SENTRAL AND THE MEANS OF PAYMENT ARTICLE I THE UNIT OF MONETARY VALUE

Section 48. The Peso. - The unit of monetary value in the Philippines is the "peso," which is represented by the sign "P." The peso is divided into one hundred (100) equal parts called "centavos," which are represented by the sign "c."

ARTICLE II ISSUE OF MEANS OF PAYMENT A. CURRENCY Section 49. Definition of Currency. - The word "currency" is hereby defined, for purposes of this Act, as meaning all Philippine notes and coins issued or circulating in accordance with the provisions of this Act. Section 50. Exclusive Issue Power. - The Bangko Sentral shall have the sole power and authority to issue currency, within the territory of the Philippines. No other person or entity, public or private, may put into circulation notes, coins or any other object or document which, in the opinion of the Monetary Board, might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral notes without prior authority from the Bangko Sentral. The Monetary Board may issue such regulations as it may deem advisable in order to prevent the circulation of foreign currency or of currency substitutes as well as to prevent the reproduction of facsimiles of Bangko Sentral notes. The Bangko Sentral shall have the authority to investigate, make arrests, conduct searches and seizures in accordance with law, for the purpose of maintaining the integrity of the currency. Violation of this provision or any regulation issued by the Bangko Sentral pursuant thereto shall constitute an offense punishable by imprisonment of not less than five (5) years but not more than ten (10) years. In case the Revised Penal Code provides for a greater penalty, then that penalty shall be imposed. Section 51. Liability for Notes and Coins. - Notes and coins issued by the Bangko Sentral shall be liabilities of the Bangko Sentral and may be issued only against, and in amounts not exceeding, the assets of the Bangko Sentral. Said notes and coins shall be a first and paramount lien on all assets of the Bangko Sentral.

The Bangko Sentral's holdings of its own notes and coins shall not be considered as part of its currency issue and, accordingly, shall not form part of the assets or liabilities of the Bangko Sentral. Section 52. Legal Tender Power. - All notes and coins issued by the Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the Philippines for all debts, both public and private: Provided, however, That, unless otherwise fixed by the Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20.00) for denominations of Ten centavos or less. Section 53. Characteristics of the Currency. - The Monetary Board, with the approval of the President of the Philippines, shall prescribe the denominations, dimensions, designs, inscriptions and other characteristics of notes issued by the Bangko Sentral: Provided, however, That said notes shall state that they are liabilities of the Bangko Sentral and are fully guaranteed by the Government of the Republic of the Philippines. Said notes shall bear the signatures, in facsimile, of the President of the Philippines and of the Governor of the Bangko Sentral. Similarly, the Monetary Board, with the approval of the President of the Philippines, shall prescribe the weight, fineness, designs, denominations and other characteristics of the coins issued by the Bangko Sentral. In the minting of coins, the Monetary Board shall give full consideration to the availability of suitable metals and to their relative prices and cost of minting. Section 54. Printing of Notes and Mining of Coins. - The Monetary Board shall prescribe the amounts of notes and coins to be printed and minted, respectively, and the conditions to which the printing of notes and the minting of coins shall be subject. The Monetary Board shall have the authority to contract institutions, mints or firms for such operations. All expenses incurred in the printing of notes and the minting of coins shall be for the account of the Bangko Sentral. Section 55. Interconvertibility of Currency. - The Bangko Sentral shall exchange, on demand and without charge, Philippine currency of any denomination for Philippine notes and coins of any other denomination requested. If for any reason the Bangko Sentral is temporarily unable to provide notes or coins of the denominations requested, it shall meet its obligations by delivering notes and coins of the denominations which most nearly approximate those requested.

Section 56. Replacement of Currency Unfit for Circulation. - The Bangko Sentral shall withdraw from circulation and shall demonetize all notes and coins which for any reason whatsoever are unfit for circulation and shall replace them by adequate notes and coins: Provided, however, That the Bangko Sentral shall not replace notes and coins the identification of which is impossible, coins which show signs of filing, clipping or perforation, and notes which have lost more than twofifths (2/5) of their surface or all of the signatures inscribed thereon. Notes and coins in such mutilated conditions shall be withdrawn from circulation and demonetized without compensation to the bearer. Section 57. Retirement of Old Notes and Coins. - The Bangko Sentral may call in for replacement notes of any series or denomination which are more than five (5) years old and coins which are more than (10) years old. Notes and coins called in for replacement in accordance with this provision shall remain legal tender for a period of one (1) year from the date of call. After this period, they shall cease to be legal tender but during the following year, or for such longer period as the Monetary Board may determine, they may be exchanged at par and without charge in the Bangko Sentral and by agents duly authorized by the Bangko Sentral for this purpose. After the expiration of this latter period, the notes and coins which have not been exchanged shall cease to be a liability of the Bangko Sentral and shall be demonetized. The Bangko Sentral shall also demonetize all notes and coins which have been called in and replaced. B. DEMAND DEPOSITS Section 58. Definition. - For purposes of this Act, the term "demand deposits" means all those liabilities of the Bangko Sentral and of other banks which are denominated in Philippine currency and are subject to payment in legal tender upon demand by the presentation of checks. Section 59. Issue of Demand Deposits. - Only banks duly authorized to do so may accept funds or create liabilities payable in pesos upon demand by the presentation of checks, and such operations shall be subject to the control of the Monetary Board in accordance with the powers granted it with respect thereto under this Act. Section 60. Legal Character. - Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debts, both public and private, is at the option of the creditor: Provided, however, That a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account.

CHAPTER III GUIDING PRINCIPLES OF MONETARY ADMINISTRATION BY THE BANGKO SENTRAL ARTICLE I DOMESTIC MONETARY STABILIZATION Section 61. Guiding Principle. - The Monetary Board shall endeavor to control any expansion or contraction in monetary aggregates which is prejudicial to the attainment or maintenance of price stability. Section 62. Power to Define Terms. - For purposes of this article and of this Act, the Monetary Board shall formulate definitions of monetary aggregates, credit and prices and shall make public such definitions and any changes thereof. Section 63. Action When Abnormal Movements Occur in the Monetary Aggregates, Credit, or Price Level. - Whenever abnormal movements in the monetary aggregates, in credit, or in prices endanger the stability of the Philippine economy or important sectors thereof, the Monetary Board shall: (a) take such remedial measures as are appropriate and within the powers granted to the Monetary Board and the Bangko Sentral under the provisions of this Act; and (b) submit to the President of the Philippines and the Congress, and make public, a detailed report which shall include, as a minimum, a description and analysis of: (1) the causes of the rise or fall of the monetary aggregates, of credit or of prices; (2) the extent to which the changes in the monetary aggregates, in credit, or in prices have been reflected in changes in the level of domestic output, employment, wages and economic activity in general, and the nature and significance of any such changes; and (3) the measures which the Monetary Board has taken and the other monetary, fiscal or administrative measures which it recommends to be adopted. Whenever the monetary aggregates, or the level of credit, increases or decreases by more than fifteen percent (15%), or the cost of living index increases by more than ten percent (10%), in relation to the level existing at the end of the corresponding month of the preceding year, or even though any of these quantitative guidelines have not been reached when in its judgment the circumstances so warrant, the Monetary Board shall submit the reports mentioned in this section, and shall state therein whether, in the opinion of the Board, said changes in the monetary aggregates, credit or cost of living represent a threat to the stability of the Philippine economy or of important sectors thereof.

The Monetary Board shall continue to submit periodic reports to the President of the Philippines and to Congress until it considers that the monetary, credit or price disturbances have disappeared or have been adequately controlled. ARTICLE II INTERNATIONAL MONETARY STABILIZATION Section 64. International Monetary Stabilization. - The Bangko Sentral shall exercise its powers under this Act to preserve the international value of the peso and to maintain its convertibility into other freely convertible currencies primarily for, although not necessarily limited to, current payments for foreign trade and invisibles. Section 65. International Reserves. - In order to maintain the international stability and convertibility of the Philippine peso, the Bangko Sentral shall maintain international reserves adequate to meet any foreseeable net demands on the Bangko Sentral for foreign currencies. In judging the adequacy of the international reserves, the Monetary Board shall be guided by the prospective receipts and payments of foreign exchange by the Philippines. The Board shall give special attention to the volume and maturity of the Bangko Sentral's own liabilities in foreign currencies, to the volume and maturity of the foreign exchange assets and liabilities of other banks operating in the Philippines and, insofar as they are known or can be estimated, the volume and maturity of the foreign exchange assets and liabilities of all other persons and entities in the Philippines. Section 66. Composition of the International Reserves. - The international reserves of the Bangko Sentral may include but shall not be limited to the following assets: (a) gold; and (b) assets in foreign currencies in the form of: documents and instruments customarily employed for the international transfer of funds; demand and time deposits in central banks, treasuries and commercial banks abroad; foreign government securities; and foreign notes and coins. The Monetary Board shall endeavor to hold the foreign exchange resources of the Bangko Sentral in freely convertible currencies; moreover, the Board shall give particular consideration to the prospects of continued strength and convertibility of the currencies in which the reserve is maintained, as well as to the anticipated demands for such currencies. The Monetary Board shall issue regulations determining the other qualifications which foreign exchange assets

must meet in order to be included in the international reserves of the Bangko Sentral. The Bangko Sentral shall be free to convert any of the assets in its international reserves into other assets as described in subsections (a) and (b) of this section. Section 67. Action When the International Stability of the Peso Is Threatened. Whenever the international reserve of the Bangko Sentral falls to a level which the Monetary Board considers inadequate to meet prospective net demands on the Bangko Sentral for foreign currencies, or whenever the international reserve appears to be in imminent danger of falling to such a level, or whenever the international reserve is falling as a result of payments or remittances abroad which, in the opinion of the Monetary Board, are contrary to the national welfare, the Monetary Board shall: (a) take such remedial measures as are appropriate and within the powers granted to the Monetary Board and the Bangko Sentral under the provisions of this Act; and (b) submit to the President of the Philippines and to Congress a detailed report which shall include, as a minimum, a description and analysis of: (1) the nature and causes of the existing or imminent decline; (2) the remedial measures already taken or to be taken by the Monetary Board; (3) the monetary, fiscal or administrative measures further proposed; and (4) the character and extent of the cooperation required from other government agencies for the successful execution of the policies of the Monetary Board. If the resultant actions fail to check the deterioration of the reserve position of the Bangko Sentral, or if the deterioration cannot be checked except by chronic restrictions on exchange and trade transactions or by sacrifice of the domestic objectives of a balanced and sustainable growth of the economy, the Monetary Board shall propose to the President, with appropriate notice of the Congress, such additional action as it deems necessary to restore equilibrium in the international balance of payments of the Philippines. The Monetary Board shall submit periodic reports to the President and to Congress until the threat to the international monetary stability of the Philippines has disappeared. CHAPTER IV INSTRUMENTS OF BANGKO SENTRAL ACTION ARTICLE I GENERAL CRITERION

Section 68. Means of Action. - In order to achieve the primary objective of price stability, the Monetary Board shall rely on its moral influence and the powers granted to it under this Act for the management of monetary aggregates. ARTICLE II OPERATIONS IN GOLD AND FOREIGN EXCHANGE Section 69. Purchases and Sales of Gold. - The Bangko Sentral may buy and sell gold in any form, subject to such regulations as the Monetary Board may issue. The purchases and sales of gold authorized by this section shall be made in the national currency at the prevailing international market price as determined by the Monetary Board. Section 70. Purchases and Sales of Foreign Exchange. - The Bangko Sentral may buy and sell foreign notes and coins, and documents and instruments of types customarily employed for the international transfer of funds. The Bangko Sentral may engage in future exchange operations. The Bangko Sentral may engage in foreign exchange transactions with the following entities or persons only: (a) banking institutions operating in the Philippines; (b) the Government, its political subdivisions and instrumentalities; (c) foreign or international financial institutions; (d) foreign governments and their instrumentalities; and (e) other entities or persons which the Monetary Board is hereby empowered to authorize as foreign exchange dealers, subject to such rules and regulations as the Monetary Board shall prescribe. In order to maintain the convertibility of the peso, the Bangko Sentral may, at the request of any banking institution operating in the Philippines, buy any quantity of foreign exchange offered, and sell any quantity of foreign exchange demanded, by such institution, provided that the foreign currencies so offered or demanded are freely convertible into gold or United States dollars. This requirement shall not apply to demands for foreign notes and coins. The Bangko Sentral shall effect its exchange transactions between foreign currencies and the Philippine peso at the rates determined in accordance with the provisions of Section 74 of this Act. Section 71. Foreign Asset Position of the Bangko Sentral. - The Bangko Sentral shall endeavor to maintain at all times a net positive foreign asset position

so that its gross foreign exchange assets will always exceed its gross foreign liabilities. In the event that the equivalent amount in pesos of the foreign exchange liabilities of the Bangko Sentral exceed twice the equivalent amount in pesos of the foreign exchange assets of the bank, the Bangko Sentral shall, within sixty (60) days from the date the limit is exceeded, submit a report to the Congress stating the origin of these liabilities, and the manner in which they will be paid. Section 72. Emergency Restrictions on Exchange Operations. - In order to achieve the primary objective of the Bangko Sentral as set forth in Section 3 of this Act, or protect the international reserves of the Bangko Sentral in the imminence of, or during an exchange crisis, or in time of national emergency and to give the Monetary Board and the Government time in which to take constructive measures to forestall, combat, or overcome such a crisis or emergency, the Monetary Board, with the concurrence of at least five (5) of its members and with the approval of the President of the Philippines, may temporarily suspend or restrict sales of exchange by the Bangko Sentral, and may subject all transactions in gold and foreign exchange to license by the Bangko Sentral, and may require that any foreign exchange thereafter obtained by any person residing or entity operating in the Philippines be delivered to the Bangko Sentral or to any bank or agent designated by the Bangko Sentral for the purpose, at the effective exchange rate or rates: Provided, however, That foreign currency deposits made under Republic Act No. 6426 shall be exempt from these requirements. Section 73. Acquisition of Inconvertible Currencies. - The Bangko Sentral shall avoid the acquisition and holding of currencies which are not freely convertible, and may acquire such currencies in an amount exceeding the minimum balance necessary to cover current demands for said currencies only when, and to the extent that, such acquisition is considered by the Monetary Board to be in the national interest. The Monetary Board shall determine the procedures which shall apply to the acquisition and disposition by the Bangko Sentral of foreign exchange which is not freely utilizable in the international market. Section 74. Exchange Rates. - The Monetary Board shall determine the exchange rate policy of the country. The Monetary Board shall determine the rates at which the Bangko Sentral shall buy and sell spot exchange, and shall establish deviation limits from the effective exchange rate or rates as it may deem proper. The Bangko Sentral shall not collect any additional commissions or charges of any sort, other than actual telegraphic or cable costs incurred by it.

The Monetary Board shall similarly determine the rates for other types of foreign exchange transactions by the Bangko Sentral, including purchases and sales of foreign notes and coins, but the margins between the effective exchange rates and the rates thus established may not exceed the corresponding margins for spot exchange transactions by more than the additional costs or expenses involved in each type of transactions. Section 75. Operations with Foreign Entities. - The Monetary Board may authorize the Bangko Sentral to grant loans to and receive loans from foreign banks and other foreign or international entities, both public and private, and may engage in such other operations with these entities as are in the national interest and are appropriate to its character as a central bank. The Bangko Sentral may also act as agent or correspondent for such entities. Upon authority of the Monetary Board, the Bangko Sentral may pledge any gold or other assets which it possesses as security against loans which it receives from foreign or international entities. ARTICLE III REGULATION OF FOREIGN EXCHANGE OPERATIONS OF THE BANKS Section 76. Foreign Exchange Holdings of the Banks. - In order that the Bangko Sentral may at all times have foreign exchange resources sufficient to enable it to maintain the international stability and convertibility of the peso, or in order to promote the domestic investment of bank resources, the Monetary Board may require the banks to sell to the Bangko Sentral or to other banks all or part of their surplus holdings of foreign exchange. Such transfers may be required for all foreign currencies or for only certain of such currencies, according to the decision of the Monetary Board. The transfers shall be made at the rates established under the provisions of Section 74 of this Act. The Monetary Board may, whenever warranted, determine the net assets and net liabilities of banks and shall, in making such a determination, take into account the bank's networth, outstanding liabilities, actual and contingent, or such other financial or performance ratios as may be appropriate under the circumstances. Any such determination of net assets and net liabilities shall be applied in all banks uniformly and without discrimination. Section 77. Requirement of Balanced Currency Position. - The Monetary Board may require the banks to maintain a balanced position between their assets and liabilities in Philippine pesos or in any other currency or currencies in which they operate. The banks shall be granted a reasonable period of time in which to adjust their currency positions to any such requirement.

The powers granted under this section shall be exercised only when special circumstances make such action necessary, in the opinion of the Monetary Board, and shall be applied to all banks alike and without discrimination. Section 78. Regulation of Non-spot Exchange Transactions. - In order to restrain the banks from taking speculative positions with respect to future fluctuations in foreign exchange rates, the Monetary Board may issue such regulations governing bank purchases and sales of non-spot exchange as it may consider necessary for said purpose. Section 79. Other Exchange Profits and Losses. - The banks shall bear the risks of non-compliance with the terms of the foreign exchange documents and instruments which they buy and sell, and shall also bear any other typically commercial or banking risks, including exchange risks not assumed by the Bangko Sentral under the provisions of the preceding section. Section 80. Information on Exchange Operations. - The banks shall report to the Bangko Sentral the volume and composition of their purchases and sales of gold and foreign exchange each day, and must furnish such additional information as the Bangko Sentral may request with reference to the movements in their accounts in foreign currencies. The Monetary Board may also require other persons and entities to report to it currently all transactions or operations in gold, in any shape or form, and in foreign exchange whether entered into or undertaken by them directly or through agents, or to submit such data as may be required on operations or activities giving rise to or in connection with or relating to a gold or foreign exchange transaction. The Monetary Board shall prescribe the forms on which such declarations must be made. The accuracy of the declarations may be verified by the Bangko Sentral by whatever inspection it may deem necessary. ARTICLE IV LOANS TO BANKING AND OTHER FINANCIAL INSTITUTIONS A. CREDIT POLICY Section 81. Guiding Principles. - The rediscounts, discounts, loans and advances which the Bangko Sentral is authorized to extend to banking institutions under the provisions of the present article of this Act shall be used to influence the volume of credit consistent with the objective of price stability. B. NORMAL CREDIT OPERATIONS

Section 82. Authorized Types of Operations. - Subject to the principle stated in the preceding section of this Act, the Bangko Sentral may normally and regularly carry on the following credit operations with banking institutions operating in the Philippines: (a) Commercial credits. - The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances, promissory notes and other credit instruments with maturities of not more than one hundred eighty (180) days from the date of their rediscount, discount or acquisition by the Bangko Sentral and resulting from transactions related to: (1) the importation, exportation, purchase or sale of readily saleable goods and products, or their transportation within the Philippines; or (2) the storing of non-perishable goods and products which are duly insured and deposited, under conditions assuring their preservation, in authorized bonded warehouses or in other places approved by the Monetary Board. (b) Production credits. - The Bangko Sentral may rediscount, discount, buy and sell bills, acceptances, promissory notes and other credit instruments having maturities of not more than three hundred sixty (360) days from the date of their rediscount, discount or acquisition by the Bangko Sentral and resulting from transactions related to the production or processing of agricultural, animal, mineral, or industrial products. Documents or instruments acquired in accordance with this subsection shall be secured by a pledge of the respective crops or products: Provided, however, That the crops or products need not be pledged to secure the documents if the original loan granted by the Bangko Sentral is secured by a lien or mortgage on real estate property seventy percent (70%) of the appraised value of which equals or exceeds the amount of the loan granted. (c) Other credits. - Special credit instruments not otherwise rediscountable under the immediately preceding subsections (a) and (b) may be eligible for rediscounting in accordance with rules and regulations which the Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral shall provide funds from non-inflationary sources: Provided, however, That the Monetary Board shall prescribe additional safeguards for disbursing these funds. (d) Advances. - The Bangko Sentral may grant advances against the following kinds of collaterals for fixed periods which, with the exception of advances against collateral named in clause (4) of the present subsection, shall not exceed one hundred eighty (180) days: (1) gold coins or bullion;

(2) securities representing obligations of the Bangko Sentral or of other domestic institutions of recognized solvency; (3) the credit instruments to which reference is made in subsection (a) of this section; (4) the credit instruments to which reference is made in subsection (b) of this section, for periods which shall not exceed three hundred sixty (360) days; (5) utilized portions of advances in current amount covered by regular overdraft agreements related to operations included under subsections (a) and (b) of this section, and certified as to amount and liquidity by the institution soliciting the advance; (6) negotiable treasury bills, certificates of indebtedness, notes and other negotiable obligations of the Government maturing within three (3) years from the date of the advance; and (7) negotiable bonds issued by the Government of the Philippines, by Philippine provincial, city or municipal governments, or by any Philippine Government instrumentality, and having maturities of not more than ten (10) years from the date of advance. The rediscounts, discounts, loans and advances made in accordance with the provisions of this section may not be renewed or extended unless extraordinary circumstances fully justify such renewal or extension. Advances made against the collateral named in clauses (6) and (7) of subsection (d) of this section may not exceed eighty percent (80%) of the current market value of the collateral. C. SPECIAL CREDIT OPERATION Section 83. Loans for Liquidity Purposes. - The Bangko Sentral may extend loans and advances to banking institutions for a period of not more than seven (7) days without any collateral for the purpose of providing liquidity to the banking system in times of need. D. EMERGENCY CREDIT OPERATION Section 84. Emergency Loans and Advances. - In periods of national and/or local emergency or of imminent financial panic which directly threaten monetary and banking stability, the Monetary Board may, by a vote of at least five (5) of its members, authorize the Bangko Sentral to grant extraordinary loans or advances to banking institutions secured by assets as defined hereunder: Provided, That while such loans or advances are outstanding, the debtor institution shall not, except upon prior

authorization by the Monetary Board, expand the total volume of its loans or investments. The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to grant emergency loans or advances to banking institutions, even during normal periods, for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought by unforeseen events, or events which, though foreseeable, could not be prevented by the bank concerned: Provided, however, That the Monetary Board has ascertained that the bank is not insolvent and has the assets defined hereunder to secure the advances: Provided, further, That a concurrent vote of at least five (5) members of the Monetary Board is obtained. The amount of any emergency loan or advance shall not exceed the sum of fifty percent (50%) of total deposits and deposit substitutes of the banking institution and shall be disbursed in two (2) or more tranches. The amount of the first tranche shall be limited to twenty-five percent (25%) of the total deposit and deposit substitutes of the institution and shall be secured by government securities to the extent of their applicable loan values and other unencumbered first class collaterals which the Monetary Board may approve: Provided, That if as determined by the Monetary Board, the circumstances surrounding the emergency warrant a loan or advance greater than the amount provided hereinabove, the amount of the first tranche may exceed twenty-five percent (25%) of the bank's total deposit and deposit substitutes if the same is adequately secured by applicable loan values of government securities and unencumbered first class collaterals approved by the Monetary Board, and the principal stockholders of the institution furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the Monetary Board may find necessary at any time. Prior to the release of the first tranche, the banking institution shall submit to the Bangko Sentral a resolution of its board of directors authorizing the Bangko Sentral to evaluate other assets of the banking institution certified by its external auditor to be good and available for collateral purposes should the release of the subsequent tranche be thereafter applied for. The Monetary Board may, by a vote of at least five (5) of its members, authorize the release of a subsequent tranche on condition that the principal stockholders of the institution:

(a) furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the Monetary Board may find necessary at any time; and (b) provide acceptable security which, in the judgment of the Monetary Board, would be adequate to supplement, where necessary, the assets tendered by the banking institution to collateralize the subsequent tranche. In connection with the exercise of these powers, the prohibitions in Section 128 of this Act shall not apply insofar as it refers to acceptance as collateral of shares and their acquisition as a result of foreclosure proceedings, including the exercise of voting rights pertaining to said shares: Provided, however, That should the Bangko Sentral acquire any of the shares it has accepted as collateral as a result of foreclosure proceedings, the Bangko Sentral shall dispose of said shares by public bidding within one (1) year from the date of consolidation of title by the Bangko Sentral. Whenever a financial institution incurs an overdraft in its account with the Bangko Sentral, the same shall be eliminated within the period prescribed in Section 102 of this Act. E. CREDIT TERMS Section 85. Interest and Rediscount. - The Bangko Sentral shall collect interest and other appropriate charges on all loans and advances it extends, the closure, receivership or liquidations of the debtor-institution notwithstanding. This provision shall apply prospectively. The Monetary Board shall fix the interest and rediscount rates to be charged by the Bangko Sentral on its credit operations in accordance with the character and term of the operation, but after due consideration has been given to the credit needs of the market, the composition of the Bangko Sentral's portfolio, and the general requirements of the national monetary policy. Interest and rediscount rates shall be applied to all banks of the same category uniformly and without discrimination. Section 86. Endorsement. - The documents rediscounted, discounted, bought or accepted as collateral by the Bangko Sentral in the course of the credit operations authorized in this article shall bear the endorsement of the institution from which they are received. Section 87. Repayment of Credits. - Documents rediscounted, discounted or accepted as collateral by the Bangko Sentral must be withdrawn by the borrowing institution on the dates of their maturities, or upon liquidation of the obligations which they represent or to which they relate whenever said obligations have been liquidated prior to their dates of maturity.

Banks shall have the right at any time to withdraw any documents which they have presented to the Bangko Sentral as collateral, upon payment in full of the corresponding debt to the Bangko Sentral, including interest charges. Section 88. Other requirements. - The Monetary Board may prescribe, within the general powers granted to it under this Act, additional conditions which borrowing institutions must satisfy in order to have access to the credit of the Bangko Sentral. These conditions may refer to the rates of interest charged by the banks, to the purposes for which their loans in general are destined, and to any other clearly definable aspect of the credit policy of the bank. Section 89. Provisional Advances to the National Government. - The Bangko Sentral may make direct provisional advances with or without interest to the National Government to finance expenditures authorized in its annual appropriation: Provided, That said advances shall be repaid before the end of three (3) months extendible by another three (3) months as the Monetary Board may allow following the date the National Government received such provisional advances and shall not, in their aggregate, exceed twenty percent (20%) of the average annual income of the borrower for the last three (3) preceding fiscal years.

ARTICLE V OPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE BANGKO SENTRAL Section 90. Principles of Open Market Operations. - The open market purchases and sales of securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective of achieving price stability. Section 91. Purchases and Sales of Government Securities. - In order to achieve the objectives of the national monetary policy, the Bangko Sentral may, in accordance with the principle stated in Section 90 of this Act and with such rules and regulations as may be prescribed by the Monetary Board, buy and sell in the open market for its own account: (a) evidences of indebtedness issued directly by the Government of the Philippines or by its political subdivisions; and (b) evidences of indebtedness issued by government instrumentalities and fully guaranteed by the Government.

The evidences of indebtedness acquired under the provisions of this section must be freely negotiable and regularly serviced and must be available to the general public through banking institutions and local government treasuries in denominations of a thousand pesos or more. Section 92. Issue and Negotiation of Bangko Sentral Obligations. - In order to provide the Bangko Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to such rules and regulations as the Monetary Board may prescribe and in accordance with the principles stated in Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness of the Bangko Sentral: Provided, That issuance of such certificates of indebtedness shall be made only in cases of extraordinary movement in price levels. Said evidences of indebtedness may be issued directly against the international reserve of the Bangko Sentral or against the securities which it has acquired under the provisions of Section 91 of this Act, or may be issued without relation to specific types of assets of the Bangko Sentral. The Monetary Board shall determine the interest rates, maturities and other characteristics of said obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in gold or foreign currencies. Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before their maturity, either through purchases in the open market or through redemptions at par and by lot if the Bangko Sentral has reserved the right to make such redemptions. The evidences of indebtedness acquired or redeemed by the Bangko Sentral shall not be included among its assets, and shall be immediately retired and cancelled. ARTICLE VI COMPOSITION OF BANGKO SENTRAL'S PORTFOLIO Section 93. Review of the Bangko Sentral's Portfolio. - At least once every month the Monetary Board shall review the portfolio of the Bangko Sentral in relation to its future credit policy. In reviewing the Bangko Sentral's portfolio, the Monetary Board shall especially consider whether a sufficiently large part of the portfolio consists of assets with early maturities, in order that a contraction in Bangko Sentral credit may be effected promptly whenever the national monetary policy so requires. ARTICLE VII BANK RESERVES

Section 94. Reserve Requirements. - In order to control the volume of money created by the credit operations of the banking system, all banks operating in the Philippines shall be required to maintain reserves against their deposit liabilities: Provided, That the Monetary Board may, at its discretion, also require all banks and/or quasi-banks to maintain reserves against funds held in trust and liabilities for deposit substitutes as defined in this Act. The required reserves of each bank shall be proportional to the volume of its deposit liabilities and shall ordinarily take the form of a deposit in the Bangko Sentral. Reserve requirements shall be applied to all banks of the same category uniformly and without discrimination. Reserves against deposit substitutes, if imposed, shall be determined in the same manner as provided for reserve requirements against regular bank deposits, with respect to the imposition, increase, and computation of reserves. The Monetary Board may exempt from reserve requirements deposits and deposit substitutes with remaining maturities of two (2) years or more, as well as interbank borrowings. Since the requirement to maintain bank reserves is imposed primarily to control the volume of money, the Bangko Sentral shall not pay interest on the reserves maintained with it unless the Monetary Board decides otherwise as warranted by circumstances. Section 95. Definition of Deposit Substitutes. - The term "deposit substitutes" is defined as an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of relending or purchasing of receivables and other obligations. These instruments may include, but need not be limited to, bankers acceptances, promissory notes, participations, certificates of assignment and similar instruments with recourse, and repurchase agreements. The Monetary Board shall determine what specific instruments shall be considered as deposit substitutes for the purposes of Section 94 of this Act: Provided, however, That deposit substitutes of commercial, industrial and other non-financial companies for the limited purpose of financing their own needs or the needs of their agents or dealers shall not be covered by the provisions of Section 94 of this Act. Section 96. Required Reserves Against Peso Deposits. - The Monetary Board may fix and, when it deems necessary, alter the minimum reserve ratios to peso deposits, as well as to deposit substitutes, which each bank and/or quasi-bank may

maintain, and such ratio shall be applied uniformly to all banks of the same category as well as to quasi-banks. Section 97. Required Reserves Against Foreign Currency Deposits. - The Monetary Board is similarly authorized to prescribe and modify the minimum reserve ratios applicable to deposits denominated in foreign currencies. Section 98. Reserves Against Unused Balances of Overdraft Lines. - In order to facilitate Bangko Sentral control over the volume of bank credit, the Monetary Board may establish minimum reserve requirements for unused balances of overdraft lines. The powers of the Monetary Board to prescribe and modify reserve requirements against unused balances of overdraft lines shall be the same as its powers with respect to reserve requirements against demand deposits. Section 99. Increase in Reserve Requirements. - Whenever in the opinion of the Monetary Board it becomes necessary to increase reserve requirements against existing liabilities, the increase shall be made in a gradual manner and shall not exceed four percentage points in any thirty-day period. Banks and other affected financial institutions shall be notified reasonably in advance of the date on which such increase is to become effective. Section 100. Computation on Reserves. - The reserve position of each bank or quasi-bank shall be calculated daily on the basis of the amount, at the close of business for the day, of the institution's reserves and the amount of its liability accounts against which reserves are required to be maintained: Provided, That with reference to holidays or non-banking days, the reserve position as calculated at the close of the business day immediately preceding such holidays and non-banking days shall apply on such days. For the purpose of computing the reserve position of each bank or quasi-bank, its principal office in the Philippines and all its branches and agencies located therein shall be considered as a single unit. Section 101. Reserve Deficiencies. - Whenever the reserve position of any bank or quasi-bank, computed in the manner specified in the preceding section of this Act, is below the required minimum, the bank or quasi-bank shall pay the Bangko Sentral one-tenth of one percent (1/10 of 1%) per day on the amount of the deficiency or the prevailing ninety-one-day treasury bill rate plus three percentage points, whichever is higher: Provided, however, That banks and quasi-banks shall ordinarily be permitted to offset any reserve deficiency occurring on one or more days of the week with any excess reserves which they may hold on other days of the same week and shall be required to pay the penalty only on the average daily deficiency during the week. In

cases of abuse, the Monetary Board may deny any bank or quasi-bank the privilege of offsetting reserve deficiencies in the aforesaid manner. If a bank or quasi-bank chronically has a reserve deficiency, the Monetary Board may limit or prohibit the making of new loans or investments by the institution and may require that part or all of the net profits of the institution be assigned to surplus. The Monetary Board may modify or set aside the reserve deficiency penalties provided in this section, for part or the entire period of a strike or lockout affecting a bank or a quasi-bank as defined in the Labor Code, or of a national emergency affecting operations of banks or quasi-banks. The Monetary Board may also modify or set aside reserved deficiency penalties for rehabilitation program of a bank. Section 102. Interbank Settlement. - The Bangko Sentral shall establish facilities for interbank clearing under such rules and regulations as the Monetary Board may prescribe: Provided, That the Bangko Sentral may charge administrative and other fees for the maintenance of such facilities. The deposit reserves maintained by the banks in the Bangko Sentral in accordance with the provisions of Section 94 of this Act shall serve as basis for the clearing of checks and the settlement of interbank balances, subject to such rules and regulations as the Monetary Board may issue with respect to such operations: Provided, That any bank which incurs on overdrawing in its deposit account with the Bangko Sentral shall fully cover said overdraft, including interest thereon at a rate equivalent to one-tenth of one percent (1/10 of 1%) per day or the prevailing ninety-one-day treasury bill rate plus three percentage points, whichever is higher, not later than the next clearing day: Provided, further, That settlement of clearing balances shall not be effected for any account which continues to be overdrawn for five (5) consecutive banking days until such time as the overdrawing is fully covered or otherwise converted into an emergency loan or advance pursuant to the provisions of Section 84 of this Act: Provided, finally, That the appropriate clearing office shall be officially notified of banks with overdrawn balances. Banks with existing overdrafts with the Bangko Sentral as of the effectivity of this Act shall, within such period as may be prescribed by the Monetary Board, either convert the overdraft into an emergency loan or advance with a plan of payment, or settle such overdrafts, and that, upon failure to so comply herewith, the Bangko Sentral shall take such action against the bank as may be warranted under this Act. Section 103. Exemption from Attachment and Other Purposes. - Deposits maintained by banks with the Bangko Sentral as part of their reserve requirements

shall be exempt from attachment, garnishments, or any other order or process of any court, government agency or any other administrative body issued to satisfy the claim of a party other than the Government, or its political subdivisions or instrumentalities. ARTICLE VIII SELECTIVE REGULATION OF BANK OPERATIONS Section 104. Guiding Principle. - The Monetary Board shall use the powers granted to it under this Act to ensure that the supply, availability and cost of money are in accord with the needs of the Philippine economy and that bank credit is not granted for speculative purposes prejudicial to the national interests. Regulations on bank operations shall be applied to all banks of the same category uniformly and without discrimination. Section 105. Margin Requirements Against Letters of Credit. - The Monetary Board may at any time prescribe minimum cash margins for the opening of letters of credit, and may relate the size of the required margin to the nature of the transaction to be financed. Section 106. Required Security Against Bank Loans. - In order to promote liquidity and solvency of the banking system, the Monetary Board may issue such regulations as it may deem necessary with respect to the maximum permissible maturities of the loans and investments which the banks may make, and the kind and amount of security to be required against the various types of credit operations of the banks. Section 107. Portfolio Ceilings. - Whenever the Monetary Board considers it advisable to prevent or check an expansion of bank credit, the Board may place an upper limit on the amount of loans and investments which the banks may hold, or may place a limit on the rate of increase of such assets within specified periods of time. The Monetary Board may apply such limits to the loans and investments of each bank or to specific categories thereof. In no case shall the Monetary Board establish limits which are below the value of the loans or investments of the banks on the date on which they are notified of such restrictions. The restrictions shall be applied to all banks uniformly and without discrimination. Section 108. Minimum Capital Ratios. - The Monetary Board may prescribe minimum ratios which the capital and surplus of the banks must bear to the volume of their assets, or to specific categories thereof, and may alter said ratios whenever it deems necessary.

ARTICLE IX COORDINATION OF CREDIT POLICIES BY GOVERNMENT INSTITUTIONS Section 109. Coordination of Credit Policies. - Government-owned corporations which perform banking or credit functions shall coordinate their general credit policies with those of the Monetary Board. Toward this end, the Monetary Board may, whenever it deems it expedient, make suggestions or recommendations to such corporations for the more effective coordination of their policies with those of the Bangko Sentral. CHAPTER V FUNCTIONS AS BANKER AND FINANCIAL ADVISOR OF THE GOVERNMENT ARTICLE I FUNCTIONS AS BANKER OF THE GOVERNMENT Section 110. Designation of Bangko Sentral as Banker of the Government. The Bangko Sentral shall act as a banker of the Government, its political subdivisions and instrumentalities. Section 111. Representation with the International Monetary Fund. - The Bangko Sentral shall represent the Government in all dealings, negotiations and transactions with the International Monetary Fund and shall carry such accounts as may result from Philippine membership in, or operations with, said Fund. Section 112. Representation with Other Financial Institutions. - The Bangko Sentral may be authorized by the Government to represent it in dealings, negotiations or transactions with the International Bank for Reconstruction and Development and with other foreign or international financial institutions or agencies. The President may, however, designate any of his other financial advisors to jointly represent the Government in such dealings, negotiations or transactions. Section 113. Official Deposits. - The Bangko Sentral shall be the official depository of the Government, its political subdivisions and instrumentalities as well as of government-owned or controlled corporations and, as a general policy, their cash balances should be deposited with the Bangko Sentral, with only minimum working balances to be held by government-owned banks and such other banks incorporated in the Philippines as the Monetary Board may designate, subject to such rules and regulations as the Board may prescribe: Provided, That such banks may hold deposits of the political subdivisions and instrumentalities of the Government beyond their minimum working balances whenever such subdivisions or instrumentalities have outstanding loans with said banks.

The Bangko Sentral may pay interest on deposits of the Government or of its political subdivisions and instrumentalities, as well as on deposits of banks with the Bangko Sentral. Section 114. Fiscal Operations. - The Bangko Sentral shall open a general cash account for the Treasurer of the Philippines, in which the liquid funds of the Government shall be deposited. Transfers of funds from this account to other accounts shall be made only upon order of the Treasurer of the Philippines. Section 115. Other Banks as Agents of the Bangko Sentral. - In the performance of its functions as fiscal agent, the Bangko Sentral may engage the services of other government-owned and controlled banks and of other domestic banks for operations in localities at home or abroad in which the Bangko Sentral does not have offices or agencies adequately equipped to perform said operations: Provided, however, That for fiscal operations in foreign countries, the Bangko Sentral may engage the services of foreign banking and financial institutions. Section 116. Remuneration for Services. - The Bangko Sentral may charge equitable rates, commissions or fees for services which it renders to the Government, its political subdivisions and instrumentalities. ARTICLE II THE MARKETING AND STABILIZATION OF SECURITIES FOR THE ACCOUNT OF THE GOVERNMENT A. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES Section 117. Issue of Government Obligations. - The issue of securities representing obligations of the Government, its political subdivisions or instrumentalities, may be made through the Bangko Sentral, which may act as agent of, and for the account of, the Government or its respective subdivisions or instrumentality, as the case may be: Provided, however, That the Bangko Sentral shall not guarantee the placement of said securities, and shall not subscribe to their issue except to replace its maturing holdings of securities with the same type as the maturing securities. Section 118. Methods of Placing Government Securities. - The Bangko Sentral may place the securities to which the preceding section refers through direct sale to financial institutions and the public. The Bangko Sentral shall not be a member of any stock exchange or syndicate, but may intervene therein for the sole purpose of regulating their operations in the placing of government securities.

The Government, or its political subdivisions or instrumentalities, shall reimburse the Bangko Sentral for the expenses incurred in the placing of the aforesaid securities. Section 119. Servicing and Redemption of the Public Debt. - The servicing and redemption of the public debt shall also be effected through the Bangko Sentral. B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT SECURITIES MARKET Section 120. The Securities Stabilization Fund. - There shall be established a "Securities Stabilization Fund" which shall be administered by the Bangko Sentral for the account of the Government. The operations of the Securities Stabilization Fund shall consist of purchases and sales, in the open market, of bonds and other evidences of indebtedness issued or fully guaranteed by the Government. The purpose of these operations shall be to increase the liquidity and stabilize the value of said securities in order thereby to promote investment in government obligations. The Monetary Board shall use the resources of the Fund to prevent, or moderate, sharp fluctuations in the quotations of said government obligations, but shall not endeavor to alter movements of the market resulting from basic changes in the pattern or level of interest rates. The Monetary Board shall issue such regulations as may be necessary to implement the provisions of this section. Section 121. Resources of the Securities Stabilization Fund. - Subject to Section 132 of this Act, the resources of the Securities Stabilization Fund shall come from the balance of the fund as held by the Central Bank under Republic Act No. 265 as of the effective date of this Act. Section 122. Profits and Losses of the Fund. - The Securities Stabilization Fund shall retain net profits which it may make on its operations, regardless of whether said profits arise from capital gains or from interest earnings. The Fund shall correspondingly bear any net losses which it may incur. ARTICLE III FUNCTIONS AS FINANCIAL ADVISOR OF THE GOVERNMENT Section 123. Financial Advice on Official Credit Operations. - Before undertaking any credit operation abroad, the Government, through the Secretary

of Finance, shall request the opinion, in writing, of the Monetary Board on the monetary implications of the contemplated action. Such opinions must similarly be requested by all political subdivisions and instrumentalities of the Government before any credit operation abroad is undertaken by them. The opinion of the Monetary Board shall be based on the gold and foreign exchange resources and obligations of the nation and on the effects of the proposed operation on the balance of payments and on monetary aggregates. Whenever the Government, or any of its political subdivisions or instrumentalities, contemplates borrowing within the Philippines, the prior opinion of the Monetary Board shall likewise be requested in order that the Board may render an opinion on the probable effects of the proposed operation on monetary aggregates, the price level, and the balance of payments. Section 124. Representation on the National Economic and Development Authority. - In order to assure effective coordination between the economic, financial and fiscal policies of the Government and the monetary, credit and exchange policies of the Bangko Sentral, the Deputy Governor designated by the Governor of the Bangko Sentral shall be an ex officio member of the National Economic and Development Authority Board. CHAPTER VI PRIVILEGES AND PROHIBITIONS ARTICLE I PRIVILEGES Section 125. Tax Exemptions. - The Bangko Sentral shall be exempt for a period of five (5) years from the approval of this Act from all national, provincial, municipal and city taxes, fees, charges and assessments. The exemption authorized in the preceding paragraph of this section shall apply to all property of the Bangko Sentral, to the resources, receipts, expenditures, profits and income of the Bangko Sentral, as well as to all contracts, deeds, documents and transactions related to the conduct of the business of the Bangko Sentral: Provided, however, That said exemptions shall apply only to such taxes, fees, charges and assessments for which the Bangko Sentral itself would otherwise be liable, and shall not apply to taxes, fees, charges, or assessments payable by persons or other entities doing business with the Bangko Sentral: Provided, further, That foreign loans and other obligations of the Bangko Sentral shall be exempt, both as to principal and interest, from any and all taxes if the payment of such taxes has been assumed by the Bangko Sentral.

Section 126. Exemption from Customs Duties. - The provision of any general or special law to the contrary notwithstanding, the importation and exportation by the Bangko Sentral of notes and coins, and of gold and other metals to be used for purposes authorized under this Act, and the importation of all equipment needed for bank note production, minting of coins, metal refining and other security printing operations shall be fully exempt from all customs duties and consular fees and from all other taxes, assessments and charges related to such importation or exportation. Section 127. Applicability of the Civil Service Law. - Appointments in the Bangko Sentral, except as to those which are policy-determining, primarily confidential or highly technical in nature, shall be made only according to the Civil Service Law and regulations: Provided, That no qualification requirements for positions in the Bangko Sentral shall be imposed other than those set by the Monetary Board: Provided, further, That, the Monetary Board or Governor, in accordance with Sections 15(c) and 17(d) of this Act, respectively, may without need of obtaining prior approval from any other government agency, appoint personnel in the Bangko Sentral whose services are deemed necessary in order not to unduly disrupt the operations of the Bangko Sentral. Officers and employees of the Bangko Sentral, including all members of the Monetary Board, shall not engage directly or indirectly in partisan activities or take part in any election except to vote. ARTICLE II PROHIBITIONS Section 128. Prohibitions. - The Bangko Sentral shall not acquire shares of any kind or accept them as collateral, and shall not participate in the ownership or management of any enterprise, either directly or indirectly. The Bangko Sentral shall not engage in development banking or financing: Provided, however, That outstanding loans obtained or extended for development financing shall not be affected by the prohibition of this section. CHAPTER VII TRANSITORY PROVISIONS Section 129. Phase-out of Fiscal Agency Functions. - Unless circumstances warrant otherwise and approved by the Congress Oversight Committee, the Bangko Sentral shall, within a period of three (3) years but in no case longer than five (5) years from the approval of this Act, phase out all fiscal agency functions provided for in Sections 117, 118, 119, and 120 as well as in other pertinent provisions of this Act and transfer the same to the Department of Finance.

Section 130. Phase-out of Regulatory Powers Over the Operations of Finance Corporations and Other Institutions Performing Similar Functions. - The Bangko Sentral shall, within a period of five (5) years from the effectivity of this Act, phase out its regulatory powers over finance companies without quasi-banking functions and other institutions performing similar functions as provided in existing laws, the same to be assumed by the Securities and Exchange Commission. Section 131. Implementing Details. - The Bangko Sentral shall be made operational by the performance of the following acts: (a) the President shall constitute the Monetary Board by appointing the members thereof within sixty (60) days from the effectivity of this Act; and (b) the transfer of such assets and liabilities from the Central Bank to the Bangko Sentral as provided in Section 132 shall be completed within ninety (90) days from the constitution of the Monetary Board. All incumbent personnel in the Central Bank as of the date of the approval of this Act shall continue to exercise their duties and functions as personnel of the Bangko Sentral subject to the provisions of Section 133: Provided, That such personnel in the Central Bank as may be necessary for the purpose of implementing Section 132 may be assigned by the Bangko Sentral Monetary Board to the Central Bank. Section 132. Transfer of Assets and Liabilities. - Upon the effectivity of this Act, three (3) members of the Monetary Board, which may include the Governor, in representation of the Bangko Sentral, the Secretary of Finance and the Secretary of Budget and Management in representation of the National Government, and the Chairmen of the Committees on Banks of the Senate and the House of Representatives shall determine the assets and liabilities of the Central Bank which may be transferred to or assumed by the Bangko Sentral. The Committee shall complete its work within ninety (90) days from the constitution of the Monetary Board submitting a comprehensive report with all its findings and justification. The following guidelines shall be strictly observed in the determination of which assets and liabilities shall be transferred to the Bangko Sentral: (a) the Monetary Board and the Secretary of Finance shall have primary responsibility for working out creative monetary and financial solutions to retire the Central Bank liabilities and losses at the least cost to the Government; (b) the Bangko Sentral shall remit seventy-five percent (75%) of its net profits to a special deposit account (sinking fund) until such time as the net liabilities of the Central Bank shall have been liquidated through generally accepted finance mechanisms such as, but not limited to, write-offs, set-offs, condonation, collections,

reappraisal, revaluation and bond issuance by the National Government, or to the National Government as dividends; (c) the assets and liabilities to be transferred shall be limited to an amount that will enable the Bangko Sentral to perform its responsibilities adequately and operate on a viable basis: Provided, That the assets shall exceed the liabilities as certified by the Commission on Audit (COA), by an initial amount of Ten billion pesos (P10,000,000,000); (d) liabilities to be assumed by the Bangko Sentral shall include liability for notes and coins in circulation as of the effective date of this Act; and (e) any asset or liability of the Central Bank not transferred to the Bangko Sentral shall be retained and administered, disposed of and liquidated by the Central Bank itself which shall continue to exist as the CB Board of Liquidators only for the purposes provided in this paragraph but not later than twenty-five (25) years or until such time that liabilities have been liquidated: Provided, That the Bangko Sentral may financially assist the Central Bank of Liquidators in the liquidation of CB liabilities: Provided, finally, That upon disposition of said retained assets and liquidation of said retained liabilities, the Central Bank shall be deemed abolished. All actions taken by the Bangko Sentral Monetary Board under this section shall be reported to Congress and the President within thirty (30) days. Section 133. Mandate to Organize. - The Bangko Sentral shall be organized by the Monetary Board without being subject to the provisions of Republic Act No. 7430, by adopting if it so desires, an entirely new staffing pattern on organizational structure to suit the operations of the Bangko Sentral under this Act. No preferential or priority right shall be given to or enjoyed by any personnel for appointment to any position in the new staffing pattern, nor shall any personnel be considered as having prior or vested rights with respect to retention in the Bangko Sentral or in any position which may be created in the new staffing pattern, even if he should be the incumbent of a similar position prior to organization. The formulation of the program of organization shall be completed within six (6) months after the effectivity of this Act, and shall be fully implemented within a period of six (6) months thereafter. Personnel who may not be retained are deemed separated from the service. Section 134. Separation Benefits. - Pursuant to Section 15 of this Act, the Monetary Board is authorized to provide separation incentives, and all those who shall retire or be separated from the service on account of reorganization under the preceding section shall be entitled to such incentives, which shall be in

addition to all gratuities and benefits to which they may be entitled under existing laws. Section 135. Repealing Clause. - Except as may be provided for in Section 46 and 132 of this Act, Republic Act No. 265, as amended, the provisions of any other law, special charters, rule or regulation issued pursuant to said Republic Act No. 265, as amended, or parts thereof, which may be inconsistent with the provisions of this Act are hereby repealed. Presidential Decree No. 1792 is likewise repealed. Section 136. Transfer of Powers. - All powers, duties and functions vested by law in the Central Bank of the Philippines not inconsistent with the provisions of this Act shall be deemed transferred to the Bangko Sentral ng Pilipinas. All references to the Central Bank of the Philippines in any law or special charters shall be deemed to refer to the Bangko Sentral. Section 137. Separability Clause. - If any provision or section of this Act or the application thereof to any person or circumstance is held invalid, the other provisions or sections of this Act, and the application of such provision or section to other persons or circumstances, shall not be affected thereby. Section 138. Effectivity Clause. - This Act shall take effect fifteen (15) days following its publication in the Official Gazette or in two (2) national newspapers of general circulation. Approved: June 14, 1993

AN ACT IMPOSING THE VALUE-ADDED TAX ON CERTAIN SERVICES BEGINNING JANUARY 1, 2001, AMENDING FOR THE PURPOSE SECTION 5 OF REPUBLIC ACT NO. 8424 AND FOR OTHER PURPOSES [REPUBLIC ACT NO. 8761 ] Section 1. Section 5 of Republic Act No. 8424 is hereby amended to read as follows: "SEC. 5. Transitory Provisions. - Effectivity of the Imposition of VAT on Certain Services. - The imposition of the value-added tax on the following services shall take effect on January 1, 2001: "(a) Services performed in the exercise of profession or calling subject to the professional tax as provided for under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and professional services performed by registered general professional partnerships; actors, actresses, talents, singers and emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage directors; and professional athletes; "(b) Services rendered by banks, non-bank financial intermediaries, finance companies, and other financial intermediaries not performing quasi-banking functions; and "(c) Services rendered by stock, real estate, commercial, customs and immigration brokers: Provided, That, for the year beginning January 1 up to December 31, 2000, the aforementioned brokers shall, in lieu of the value-added tax prescribed under Title IV of the National Internal Revenue Code of 1997, be subject to a tax equivalent to seven percent (7%) based on gross receipts from brokering services which shall be paid in the manner and in accordance with the provisions of Title V of the said Code: Provided, further, That beginning January 1, 2001, the aforementioned brokers shall be subject to the value-added tax, in lieu of the seven percent (7%) tax. "The taxpayers rendering services mentioned under paragraphs (a) and (b) hereof, shall pay the applicable taxes prescribed under the pertinent provisions of the National Internal Revenue Code, as amended." Section 2. Implementing Rules and Regulations. - The Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and regulations for the effective implementation of this Act.

Section 3. Repealing Clause. - All laws, decrees, orders, issuances, rules and regulations and other issuances or parts thereof inconsistent with this Act are hereby repealed or modified accordingly. Section 4. Effectivity. - This Act shall take effect on January 1, 2000. Approved: February 16, 2000

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR. [REPUBLIC ACT No. 1405, as amended] Section 1. It is hereby declared to be the policy of the Government to give encouragement to the people to deposit their money in banking institutions and to discourage private hoarding so that the same may be properly utilized by banks in authorized loans to assist in the economic development of the country. Section 2. All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation. Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned in Section two hereof any information concerning said deposits. Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and Regulations which are inconsistent with the provisions of this Act are hereby repealed. Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment of not more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the court. Section 6. This Act shall take effect upon its approval. Approved: September 9, 1955
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AN ACT ESTABLISHING THE PHILIPPINE DEPOSIT INSURANCE CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR OTHER PURPOSES [REPUBLIC ACT NO. 3591, as amended] THE CREATION OF THE PHILIPPINE DEPOSIT INSURANCE CORPORATION SECTION 1. There is hereby created a Philippine Deposit Insurance Corporation hereinafter referred to as the Corporation which shall insure, as herein provided, the deposits of all banks which are entitled to the benefits of insurance under this Act, and which shall have the powers hereinafter granted. The Corporation shall, as a basic policy, promote and safeguard the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits.1 BOARD OF DIRECTORS: COMPOSITION AND AUTHORITY SECTION 2. The powers and functions of the Corporation shall be vested in and exercised by a Board of Directors which shall be composed of five (5) members as follows: a. The Secretary of Finance who shall be the ex-officio Chairman of the Board without compensation. b. The Governor of the Bangko Sentral ng Pilipinas, who shall be ex-officio member of the Board without compensation. (As amended by R.A. 9302, 12 August 2004) c. The President of the Corporation, who shall be appointed by the President of the Philippines from either the Government or private sector to serve on a full-

time basis for a term of six (6) years. The President of the Corporation shall also serve as Vice Chairman of the Board. (As amended by R.A. 9302, 12 August 2004) d. Two (2) members from the private sector, to be appointed for a term of six (6) years without reappointment by the President of the Philippines: Provided, That of those first appointed, the first appointee shall serve for a period of two (2) years. No person shall be appointed as member of the Board unless he be of good moral character and of unquestionable integrity and responsibility, and who is of recognized competence in economics, banking and finance, law, management administration or insurance, and shall be at least thirty-five (35) years of age. For the duration of their tenure or term in office and for a period of one year thereafter, the appointive members of the Board shall be disqualified from holding any office, position or employment in any insured bank. The Secretary of Finance and the Governor of the Bangko Sentral may each designate a representative, whose position shall not be lower than an undersecretary or deputy governor respectively, to attend such meetings and to vote on behalf of their respective principals. Whenever the Chairman of the Board is unable to attend a meeting of the Board, or in the event of a vacancy in the office of the Secretary of Finance, the President of the Corporation shall act as Chairman. (As amended by R.A. 9302, 12 Aug 2004) The presence of three (3) members shall constitute a quorum. All decisions of the Board of Directors shall require the concurrence of at least three (3) members. (As amended by R.A. 9302, 12 August 2004) The Secretary of Finance shall fix the rate of per diem for every Board meeting attended by the members of the Board of Directors from the private sector. The President of the Philippines may fix such emoluments that may be received by the Board of Directors comparable to the emoluments of members of the Board of Directors of other government financial institutions. (As amended by R.A. 9302, 12 August 2004) The Board of Directors shall have the authority: 1. To prepare and issue rules and regulations as it considers necessary for the effective discharge of its responsibilities; 2. To direct the management, operations and administration of the Corporation; 3. To establish a human resource management system which shall govern the selection, hiring, appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to establish professionalism and excellence at all levels of the

Corporation in accordance with sound principles of management. (As added by R.A. 9302, 12 August 2004) A compensation structure, based on job evaluation studies and wage surveys and subject to the Boards approval, shall be instituted as an integral component of the Corporations human resource development program: Provided, That all positions in the Corporation shall be governed by a compensation, position classification system and qualification standards approved by the Board based on a comprehensive job analysis and audit of actual duties and responsibilities. The compensation plan shall be comparable with the prevailing compensation plans of other government financial institutions and shall be subject to review by the Board no more than once every two (2) years without prejudice to yearly merit reviews or increases based on productivity and profitability. The Corporation shall therefore be exempt from existing laws, rules and regulations on compensation, position classification and qualification standards. It shall however endeavor to make its system conform as closely as possible with the principles under Republic Act No. 6758, as amended. (As added by R.A. 9302, 12 August 2004 4. To appoint, establish the rank, fix the remuneration, approve local and foreign training of, and remove any officer or employee of the Corporation, for cause, subject to pertinent civil service laws: Provided, That the Board of Directors may delegate this authority to the President subject to specific guidelines; (As amended by R.A. 9302, 12 August 2004) 5. To adopt an annual budget for, and authorize such expenditures by the Corporation as are in the interest of the effective administration and operation of the Corporation; (As amended by R.A. 9302, 12 August 2004) and 6. To approve the methodology for determining the level and amount of provisioning for insurance and financial assistance losses, which shall establish reasonable levels of deposit insurance reserves. (As added by R.A. 9302, 12 August 2004) 7. To review the organizational set-up of the Corporation and adopt a new or revised rganizational structure as it may deem necessary for the Corporation to undertake its mandate and functions. (As added by R.A. 9576, 29 April 2009) PRESIDENT OF THE CORPORATION COMPENSATION, POWERS, AND DUTIES SECTION 3. The President of the Corporation shall be the Chief Executive thereof and his salary shall be fixed by the President of the Philippines at a sum commensurate to the importance and responsibility attached to the position. The sum total of the salary of the President and the allowances and other emoluments

which the Board of Directors may grant him shall be the ceiling for fixing the salary, allowances and other emoluments of all other personnel in the Corporation. (Renumbered from Sec. 2-A by R.A. 9302, 12 August 2004) The powers and duties of the President of the Corporation are: a. To prepare the agenda for the meeting of the Board and to submit for the consideration of the Board the policies and measures which he believes to be necessary to carry out the purposes and provisions of this Act; b. To execute and administer the policies and measures approved by the Board; c. To direct and supervise the operations and internal administration of the Corporation in accordance with the policies established by the Board. The President may delegate certain of his administrative responsibilities to other officers of the Corporation, subject to the rules and regulations of the Board; d. To represent the Corporation, upon prior authority of the Board, in all dealings with other offices, agencies and instrumentalities of the government and with all other persons or entities, public or private, whether domestic, foreign or international; e. To authorize, with his signature, upon prior authority of the Board, contracts entered into by the Corporation, notes and securities issued by the Corporation, and the annual reports, balance sheets, profits and loss statements, correspondence and other documents of the Corporation. The signature of the President may be in facsimile wherever appropriate; f. To represent the Corporation, either personally or through counsel, in all legal proceedings or actions; g. To delegate, with the prior approval of the Board of Directors, his power to represent the Corporation, as provided in subsections (d) and (f) of this Section, to other officers of the Corporation; and h. To exercise such other powers as may be vested in him by the Board. The President shall be assisted by a Vice President and other officials whose appointment and removal for cause shall be approved and whose salary shall be fixed by the Board of Directors upon recommendation of the President of the Corporation. During the absence or temporary incapacity of the President, or in case of vacancy or permanent incapacity and pending the appointment of a new President of the Corporation by the President of the Philippines, the Vice President shall act as President and discharge the duties and responsibilities thereof. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992)

DEFINITION OF TERMS SECTION 4. As used in this Act - (Renumbered from Sec. 3 by R.A. 9302, 12 August 2004) a. The term Board of Directors means the Board of Directors of the Corporation. b. The term Bank and Banking Institution shall be synonymous and interchangeable and shall include banks, commercial banks, savings bank, mortgage banks, rural banks, development banks, cooperative banks, stock savings and loan associations and branches and agencies in the Philippines of foreign banks and all other corporations authorized to perform banking functions in the Philippines. (As amended by R.A. 7400, 13 April 1992) c. The term receiver includes a receiver, commission, person or other agency charged by law with the duty to take charge of the assets and liabilities of a bank which has been forbidden from doing business in the Philippines, as well as the duty to gather, preserve and administer such assets and liabilities for the benefit of the depositors and creditors of said bank, and to continue into liquidation whenever authorized under this Act or other laws, and to dispose of the assets and to wind up the affairs of such bank. (As amended by R.A. 7400, 13 April 1992) d. The term insured bank means any bank the deposits of which are insured in accordance with the provisions of this Act. e. The term non-insured bank means any bank the deposits of which are not insured. f. The term deposit means the unpaid balance of money or its equivalent received by a bank in the usual course of business and for which it has given or is obliged to give credit to a commercial, checking, savings, time or thrift account, or issued in accordance with Bangko Sentral rules and regulations and other applicable laws, together with such other obligations of a bank, which, consistent with banking usage and practices, the Board of Directors shall determine and prescribe by regulations to be deposit liabilities of the bank: Provided, That any obligation of a bank which is payable at the office of the bank located outside of the Philippines shall not be a deposit for any of the purposes of this Act or included as part of the total deposits or of insured deposit: Provided, further, That, subject to the approval of the Board of Directors, any insured bank which is incorporated under the laws of the Philippines which maintains a branch outside the Philippines may elect to include for insurance its deposit obligations payable only at such branch.

The Corporation shall not pay deposit insurance for the following accounts or transactions, whether denominated, documented, recorded or booked as deposit by the bank: 1. Investment products such as bonds and securities, trust accounts, and other similar instruments; 2. Deposit accounts or transactions which are unfunded, or that are fictitious or fraudulent; 3. Deposit accounts or transactions constituting, and/or emanating from, unsafe and unsound banking practice/s, as determined by the Corporation, in consultation with the BSP, after due notice and hearing, and publication of a cease and desist order issued by the Corporation against such deposit accounts or transactions; and 4. Deposits that are determined to be the proceeds of an unlawful activity as defined under Republic Act 9160, as amended. The actions of the Corporation taken under this section shall be final and executory, and may not be restrained or set aside by the court, except on appropriate petition for certiorari on the ground that the action was taken in excess of jurisdiction or with such grave abuse of discretion as to amount to a lack or excess of jurisdiction. The petition for certiorari may only be filed within thirty (30) days from notice of denial of claim for deposit insurance. (As amended by P.D. 1940, 27 June 1984; R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004; R.A. 9576, 29 April 2009) g. The term insured deposit means the amount due to any bona fide depositor for legitimate deposits in an insured bank net of any obligation of the depositor to the insured bank as of the date of closure, but not to exceed Five Hundred Thousand Pesos (P500,000.00).2 Such net amount shall be determined according to such regulations as the Board of Directors may prescribe. In determining such amount due to any depositor, there shall be added together all deposits in the bank maintained in the same right and capacity for his benefit either in his own name or in the name of others. A joint account regardless of whether the conjunction "and," "or," "and/or" is used, shall be insured separately from any individually-owned deposit account: Provided, That (1) If the account is held jointly by two or more natural persons, or by two or more juridical persons or entities, the maximum insured deposit shall be divided into as many equal shares as there are individuals, juridical persons or entities, unless a different sharing is stipulated in the document of deposit, and (2) if the account is held by a juridical person or entity jointly with one or more natural persons, the maximum insured deposit shall be presumed to belong entirely to such juridical person or entity: Provided, further, That the aggregate of the interest of each coowner over several joint accounts, whether owned by the same or different

combinations of individuals, juridical persons or entities, shall likewise be subject to the maximum insured deposit of Five Hundred Thousand Pesos (P500,000.00): Provided, furthermore, That the provisions of any law to the contrary notwithstanding, no owner/holder of any negotiable certificate of deposit shall be recognized as a depositor entitled to the rights provided in this Act unless his name is registered as owner/holder thereof in the books of the issuing bank: Provided, finally, That, in case of a condition that threatens the monetary and financial stability of the banking system that may have systemic consequences, as defined in section 17 hereof, as determined by the Monetary Board, the maximum deposit insurance cover may be adjusted in such amount, for such a period, and/or for such deposit products, as may be determined by a unanimous vote of the Board of Directors in a meeting called for the purpose and chaired by the Secretary of Finance, subject to the approval of the President of the Philippines. (As amended by R.A. 9302, 12 August 2004; R.A. 9576, 2009) h. The term transfer deposit means a deposit in an insured bank made available to a depositor by the Corporation as payment of insured deposit of such depositor in a closed bank and assumed by another insured bank. i. The term trust funds means funds held by an insured bank in a fiduciary capacity and includes without being limited to, funds held as trustee, executor, administrator, guardian or agent. DEPOSIT INSURANCE COVERAGE SECTION 5. The deposit liabilities of any bank or banking institution, which is engaged in the business of receiving deposits as herein defined on the effective date of this Act, or which thereafter may engage in the business of receiving deposits, shall be insured with the Corporation. (As amended by R.A. 6037, 04 August 1969; renumbered from Sec. 4 by R.A. 9302, 12 August 2004) ASSESSMENT OF MEMBER BANKS SECTION 6. a. The assessment rate shall be determined by the Board of Directors: Provided, That the assessment rate shall not exceed one-fifth (1/5) of one per centum (1%) per annum. The semiannual assessment for each insured bank shall be in the amount of the product of one-half (1/2) the assessment rate multiplied by the assessment base but in no case shall it be less than Five thousand pesos (P5,000.00). The assessment base shall be the amount of the liability of the bank for deposits as defined under subsection (f) of Section 4 without any deduction for indebtedness of depositors. (As amended by R.A. 9302, 12 August 2004)

The semi-annual assessment base for one semi-annual period shall be the average of the assessment base of the bank as of the close of business on March thirty-one and June thirty and the semi-annual assessment base for the other semi-annual period shall be the average of the assessment base of the bank as of the close of business on September thirty and December thirty-one: Provided, That when any of said days is a non-business day or legal holiday, either national or provincial, the preceding business day shall be used. The certified statements required to be filed with the Corporation under subsections (b) and (c) of this Section shall be in such form and set forth such supporting information as the Board of Directors shall prescribe. The assessment payments required from the insured banks under subsections (b) and (c) of this Section shall be made in such manner and at such time or times as the Board of Directors shall prescribe, provided the time or times so prescribed shall not be later than sixty (60) days after filing the certified statement setting forth the amount of assessment. (As amended by R.A. 7400, 13 April 1992) b. On or before the 31st of July of each year, each insured bank shall file with the Corporation a certified statement showing for the six months ending on the preceding June thirty the amount of the assessment base and the amount of the semi-annual assessment due to the Corporation for the period ending on the following December thirty-one, determined in accordance with subsection (a) of this Section, which shall contain or be verified by a written declaration that it is made under the penalties of perjury. Each insured bank shall pay to the Corporation the amount of the semi-annual assessment it is required to certify. On or before the 31st day of January of each year, each insured bank shall file with the Corporation a similar certified statement for the six months ending on the preceding December thirtyone and shall pay to the Corporation the amount of the semi-annual assessment for the period ending on the following June thirty which it is required to certify. (As amended by P.D. 1940, 27 June 1984) c. Each bank which becomes an insured bank shall not be required to file any certified statement or pay any 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 of subsection (b) of this section except that the semiannual assessment base for its first certified statement shall be the assessment base of the bank as of the close of business on the preceding June thirty or December thirty-one, whichever is applicable, determined in accordance with subsection (a) of this section. If such bank has assumed the liabilities for deposits of another bank or banks, it shall include such liabilities in its assessment base. The first certified statement shall show as the amount of the first semi-annual assessment due to the

Corporation, an amount equal to the product of one-half of the annual assessment rate multiplied by such assessment base. d. All assessment collections and income from operations after expenses and charges shall be added to the Deposit Insurance Fund under Section 13 hereof. Such expenses and charges are: (1) the operating costs and expenses of the Corporation for the calendar year; (2) additions to reserve to provide for insurance and financial assistance losses, net of recoverable amounts from applicable assets and collaterals, during the calendar year; and (3) the net insurance and financial assistance losses sustained in said calendar year. (As amended by R.A. 9302, 12 August 2004) e. The Corporation (1) may refund to an insured bank any payment of assessment in excess of the amount due to the Corporation or (2) may credit such excess toward the payment of the assessment next becoming due from such bank and upon succeeding assessments until the credit is exhausted. f. Any insured bank which fails to file any certified statement required to be filed by it in connection with determining the amount of any assessment payable by the bank to the Corporation may be compelled to file such statement by mandatory injunction or other appropriate remedy in a suit brought for such purpose by the Corporation against the bank and any officer or officers thereof in any court of the Philippines of competent jurisdiction in which such bank is located. g. The Corporation, in a suit brought in any court of competent jurisdiction, shall be entitled to recover from any insured bank the amount of any unpaid assessment lawfully payable by such insured bank to the Corporation, whether or not such bank shall have filed any such certified statement and whether or not suit shall have been brought to compel the bank to file any such statement. No action or proceeding shall be brought for recovery of any assessment due to the Corporation or for the recovering of any amount paid to the Corporation in excess of the amount due to it, unless such action or proceeding shall have been brought within five years after the right accrued for which the claim is made, except where the insured bank has made or filed with the Corporation a false or fraudulent certified statement with the intent to evade, in whole or in part, the payment of assessment, in which case the claim shall not have been deemed to have accrued until the discovery by the Corporation, that the certified statement is false or fraudulent. h. The Corporation shall not terminate the insured status of any bank which continues to operate or receive deposits. Should any insured bank fail or refuse to pay any assessment required to be paid by such bank under any provision of this

Act, and should the bank not correct such failure or refusal within thirty (30) days after written notice has been given by the Corporation to an officer of the bank citing this subsection, and stating that the bank has failed or refused to pay as required by the law, the Corporation may, at its discretion, file a case for collection before the appropriate court without prejudice to the imposition of administrative sanctions allowed under the provisions of this Law on the bank officials responsible for the nonpayment of assessment fees. (As amended by R.A. 9302, 12 August 2004) SANCTIONS AGAINST UNSAFE AND UNSOUND BANKING PRACTICES SECTION 7. a. Whenever upon examination by the Corporation into the condition of any insured bank, it shall be disclosed that an insured bank or its directors or agents have committed, are committing or about to commit unsafe or unsound practices in conducting the business of the bank, or have violated, are violating or about to violate any provisions of any law or regulation to which the insured bank is subject, the Board of Directors shall submit the report of the examination to the Monetary Board to secure corrective action thereon. If no such corrective action is taken by the Monetary Board within forty-five (45) days from the submission of the report, the Board of Directors shall, motu proprio, institute corrective action which it deems necessary. The Board of Directors may thereafter issue a cease and desist order, and require the bank or its directors or agents concerned to correct the practices or violations within fortyfive (45) days. However, if the practice or violation is likely to cause insolvency or substantial dissipation of assets or earnings of the bank, or is likely to seriously weaken the condition of the bank or otherwise seriously prejudice the interests of its depositors and the Corporation, the period to take corrective action shall not be more than fifteen (15) days. The order may also include the imposition of fines provided in Section 21 (f) hereof. The Board of Directors shall duly inform the Monetary Board of the Bangko Sentral ng Pilipinas of action it has taken under this subsection with respect to such practices or violations. (As amended by R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004) b. The actions and proceedings provided in the preceding subsection may be undertaken by the Corporation if, in its opinion, an insured bank or its directors or agents have violated, are violating or about to violate any provision of this Act or any order, rule or instruction issued by the Corporation or any written condition imposed by the Corporation in connection with any transaction with or grant by the Corporation. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992) POWERS AS A CORPORATE BODY SECTION 8.The Corporation as a corporate body shall have the power -

First - To adopt and use a corporate seal; Second - To have succession until dissolved by an Act of Congress; Third - To make contracts; Fourth - To sue and be sued, complain and defend, in any court of law in the Philippines. All suits of a civil nature to which the Corporation shall be a part shall be deemed to arise under the laws of the Philippines. No attachment or execution shall be issued against the Corporation or its property before final judgment in any suit, action, or proceeding in any court. The Board of Directors shall designate an agent upon whom service of process may be made in any province or city or jurisdiction in which any insured bank is located; Fifth - To appoint by its Board of Directors such officers and employees as are not otherwise provided for in this Act to define their duties, fix their compensation, require bonds of them and fix penalty thereof and to dismiss such officers and employees for cause; Sixth - To prescribe, by its Board of Directors, by-laws not inconsistent with law, regulating the manner in which its general business may be conducted, and the privileges granted to it by law may be exercised and enjoyed; Seventh - To exercise by its Board of Directors, or duly authorized officers or agents, all powers specifically granted by the provisions of this Act, and such incidental powers as shall be necessary to carry on the powers so granted; Eighth To conduct examination of banks with prior approval of the Monetary Board: Provided, That no examination can be conducted within twelve (12) months from the last examination date: Provided, however, That the Corporation may, in coordination with the Bangko Sentral, conduct a special examination as the Board of Directors, by an affirmative vote of a majority of all of its members, if there is a threatened or impending closure of a bank; Provided, further, That, notwithstanding the provisions of Republic Act No. 1405, as amended, Republic Act No. 6426, as amended, Republic Act No. 8791, and other laws, the Corporation and/or the Bangko Sentral, may inquire into or examine deposit accounts and all information related thereto in case there is a finding of unsafe or unsound banking practice; Provided, finally, That to avoid overlapping of efforts, the examination shall maximize the efficient use of the relevant reports, information, and findings of the Bangko Sentral, which it shall make available to the Corporation; (As amended by R.A. 9302, 12 August 2004, R.A. 9576,29 April 2009) Ninth - To act as receiver;

Tenth - To prescribe by its Board of Directors such rules and regulations as it may deem necessary to carry out the provisions of this Act; (As amended by R.A. 6037, 04 August 1969) Eleventh - The Corporation may establish its own provident fund which shall consist of contributions made both by the Corporation and by its officers and employees to a common fund for the payment of benefits to such officers or employees or their heirs. The Board of Directors shall prepare and issue rules and regulations as it may deem necessary to make effective the establishment and operation of the fund; (As amended by P.D. 1940, 27 June 1984) Twelfth - To compromise, condone or release, in whole or in part, any of claim or settled liability to the Corporation, regardless of the amount involved, under such terms and conditions as may be imposed by the Board of Directors to protect the interest of the Corporation. (As added by R.A. 7400, 13 April 1992) POWERS AND RESPONSIBILITIES AND PROHIBITIONS SECTION 9. a. The Board of Directors shall administer the affairs of the Corporation fairly and impartially and without discrimination. The Corporation shall be entitled to the free use of Philippine mails in the same manner as the other offices of the national government. b. The Board of Directors shall appoint examiners who shall have power, on behalf of the Corporation to examine any insured bank. Each such examiner shall have the power to make a thorough examination of all the affairs of the bank and in doing so, he shall have the power to administer oaths, to examine and take and preserve the testimony of any of the officers and agents thereof, and, to compel the presentation of books, documents, papers, or records necessary in his judgment to ascertain the facts relative to the condition of the bank; and shall make a full and detailed report of the condition of the bank to the Corporation. The Board of Directors in like manner shall appoint claim agents who shall have the power to investigate and examine all claims for insured deposits and transferred deposits. Each claim agent shall have the power to administer oaths and to examine under oath and take and preserve testimony of any person relating to such claim. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992) (b-1) The investigators appointed by the Board of Directors shall have the power on behalf of the Corporation to conduct investigations on frauds, irregularities and anomalies committed in banks, based on reports of examination conducted by the Corporation and Bangko Sentral ng Pilipinas or complaints from depositors or from

other government agency. Each such investigator shall have the power to administer oaths, and to examine and take and preserve the testimony of any person relating to the subject of investigation. (As added by R.A. 9302, 12 August 2004) c. Each insured bank shall make to the Corporation reports of condition in such form and at such times as the Board of Directors may require such reports to be published in such manner, not inconsistent with any applicable law, as it may direct. Every such bank which fails to make or publish any such report within such time, not less than five days, as the Board of Directors may require, shall be subject to a penalty of not more than P100 for each day of such failure recoverable by the Corporation for its use. d. The Corporation shall have access to reports of examination made by, and reports of condition made to the Bangko Sentral ng Pilipinas or its appropriate supervising departments, and the Bangko Sentral ng Pilipinas shall also have access to reports of examination made by, and reports of condition made to the Corporation: Provided, That the provisions of any law to the contrary notwithstanding, the Corporation shall likewise have access to reports, findings and any other information derived from any special or general examination or inquiry conducted by the Bangko Sentral in respect to bank fraud or serious irregularity in an insured bank: Provided, That the Corporation shall use reports and findings under similar terms and conditions prescribed by applicable laws on the Bangko Sentral. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004) (d-1) Each insured bank shall keep and maintain a true and accurate record or statement of its daily deposit transactions consistent with the standards set by the Bangko Sentral ng Pilipinas and the Corporation. Compliance with such standards shall be duly certified by the president of the bank or the compliance officer: Provided, That refusal or willful failure to issue the required certification shall constitute a violation of this Section and shall subject such officers of the bank to the sanctions provided for under Section 21 (f) of this Act. (As added by R.A. 9302, 12 August 2004) e. Personnel of the Corporation are hereby prohibited from: 1. being an officer, director, consultant, employee or stockholder, directly or indirectly, of any bank or banking institution except as otherwise provided in this Act; (As added by R.A. 7400, 13 April 1992)

2. receiving any gift or thing of value from any officer, director or employee thereof; (As added by R.A. 7400, 13 April 1992) 3. revealing in any manner, except as provided in this Act or under order of the court, information relating to the condition or business of any such institution. This prohibition shall not apply to the giving of information to the Board of Directors, the President of the Corporation, Congress, any agency of government authorized by law, or to any person authorized by either of them in writing to receive such information. (As amended by R.A. 9302, 12 August 2004) f. The Corporation shall underwrite or advance litigation costs and expenses, including legal fees and other expenses of external counsel, or provide legal assistance to, directors, officers, employees or agents of the 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 party by reason of, or in connection with, the exercise of authority or performance of functions and duties under this Act: Provided, That such legal protection shall not apply to any civil, criminal, administrative or any action or proceeding that may be initiated by the Corporation, in whatever capacity, against such director, officer, employee or agent: Provided, further, That directors, officers, employees or agents who shall resign, retire, transfer to another agency or be separated from the service, shall continue to be provided with such legal protection in connection with any act done or omitted to be done by them in good faith during their tenure or employment with the Corporation: Provided, finally, That in the event of a settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Corporation is advised by counsel that the persons to be indemnified did not commit any negligence or misconduct. (As added by R.A. 9302, 12 August 2004) g. The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay the amount advanced should it ultimately be determined by the Board of Directors that he is not entitled to be indemnified as provided in this subsection. (As added by R.A. 9302, 12 August 2004) h. Unless the actions of the Corporation or any of its officers and employees are found to be in willful violation of this Act, performed in bad faith, with malice and/or gross negligence, the Corporation, its directors, officers, employees and agents are held free and harmless to the fullest extent permitted by law from any liability, and they shall be indemnified for any and all liabilities, losses, claims, demands, damages,

deficiencies, costs and expenses of whatsoever kind and nature that may arise in connection with the performance of their functions, without prejudice to any criminal liability under existing laws. (As added by R.A. 9576, 29 April 2009) i. Legal assistance shall include the grant or advance of reasonable legal fees as determined by the Board of Directors to enable the concerned director, officer, employee or agent to engage counsel of his choice, subject to approval by the Board of Directors. Notwithstanding the provisions of this Section and Section 2, members of the Board of Directors and personnel of the Corporation may become directors and officers of any bank and banking institution and of any entity related to such institution in connection with financial assistance extended by the Corporation to such institution and when, in the opinion of the Board, it is appropriate to make such designation to protect the interest of the Corporation. (As amended by R.A. 9302, 12 August 2004) Borrowing from any bank or banking institution by examiners and other personnel of the examination departments of the Corporation shall be prohibited only with respect to the particular institution in which they are assigned, or are conducting an examination. Personnel of other departments, offices or units of the Corporation shall likewise be prohibited from borrowing from any bank or banking institution during the period of time that a transaction of such institution with the Corporation is being evaluated, processed or acted upon by such personnel: Provided, however, That the Board may, at its discretion, indicate the position levels or functional groups to which the prohibition is applicable. (As amended by R.A. 7400, 13 April 1992) Borrowing by all full-time personnel of the Corporation from any bank or banking institution shall be secured and disclosed to the Board, and shall be subject to such further rules and regulations as the Board may prescribe. (As amended by R.A. 7400, 13 April 1992) SECTION 10. a. The provisions of other laws, general or special, to the contrary otwithstanding, whenever it shall be appropriate for the Monetary Board of the Bangko Sentral ng Pilipinas to appoint a receiver of any banking institution pursuant to existing laws, the Monetary Board shall give prior notice and appoint the Corporation as receiver. (As amended/renumbered from Sec. 9-A by R.A. 9302, 12 Aug2004)

b. The Corporation as receiver shall control, manage and administer the affairs of the closed bank. Effective immediately upon takeover as receiver of such bank, the powers, functions and duties, as well as all allowances, remunerations and perquisites of the directors, officers, and stockholders of such bank are suspended, and the relevant provisions of the Articles of Incorporation and By-laws of the closed bank are likewise deemed suspended. (As added by R.A. 9302, 12 August 2004) The assets of the closed bank under receivership shall be deemed in custodia legis in the hands of the receiver. From the time the closed bank is placed under such receivership, its assets shall not be subject to attachment, garnishment, execution, levy or any other court processes. Therefore, a judge, officer of the court or any person who shall issue, order, process or cause the issuance or implementation of the writ of garnishment, levy, attachment or execution shall be liable under Section 21 hereof. (As added by R.A. 9302, 12 August 2004) c. In addition to the powers of a receiver pursuant to existing laws, the Corporation is empowered to: 1. bring suits to enforce liabilities to or recoveries of the closed bank; (As amended by R.A. 9302, 12 August 2004) 2. appoint and hire persons or entities of recognized competence in banking or finance as its deputies and assistants, to perform such powers and functions of the Corporation as receiver or liquidator of the closed bank; (As amended by R.A. 9302, 12 August 2004) 3. suspend or terminate the employment of officers and employees of the closed bank: Provided, That payment of separation pay or benefits shall be made only after the closed bank has been placed under liquidation pursuant to the order of the Monetary Board under Section 30 of R.A. 7653, and that such payment shall be made from available funds of the bank after deducting reasonable expenses for receivership and liquidation; (As added by R.A. 9302, 12 August 2004) 4. pay accrued utilities, rentals and salaries of personnel of the closed bank, for a period not exceeding three (3) months, from available funds of the closed bank; (As added by R.A. 9302, 12 August 2004) 5. collect loans and other claims of the closed bank, and for the purpose, modify, compromise or restructure the terms and conditions of such loans or claims as may be deemed advantageous to the interest of the creditors and claimants of the closed

bank; (As added by. R.A. 9302, 12 August 2004) 6. hire or retain private counsels as may be necessary; (As added by R.A. 9302, 12 August 2004) 7. borrow or obtain a loan, or mortgage, pledge or encumber any asset of the closed bank, when necessary to preserve or prevent dissipation of the assets, or to redeem foreclosed assets of the closed bank, or to minimize losses to the depositors and creditors; (As added by R.A. 9302, 12 August 2004) 8. if the stipulated interest on deposits is unusually high compared with the prevailing applicable interest rate, the Corporation as receiver may exercise such powers which may include a reduction of the interest rate to a reasonable rate: Provided, That any modification or reduction shall apply only to unpaid interest; (As added by R.A. 9302, 12 August 2004) and and 9. exercise such other powers as are inherent and necessary for the effective discharge of the duties of the Corporation as a receiver. (As added by R.A. 9302, 12 August 2004) The Board of Directors shall adopt such policies and guidelines as may be necessary for the performance of the above powers by personnel, deputies and agents of the Corporation. (As added by R.A. 9302, 12 August 2004) SECTION 11. In all cases or actions filed by the Corporation as receiver for the recovery of, or involving any asset of the closed bank, payment of all docket and other court fees shall be deferred until the action is terminated with finality. Any such fees shall constitute as a first lien on any judgment in favor of the closed bank or in case of unfavorable judgment, such fees shall be paid as administrative expenses during the distribution of the assets of the closed bank. (As added by R.A. 9302, 12 August 2004) SECTION 12. Before any distribution of the assets of the closed bank in accordance with the preference established by law, the Corporation shall periodically charge against said assets reasonable receivership expenses and subject to approval by the proper court, reasonable liquidation expenses, it has incurred as part of the cost of receivership/liquidation proceedings and collect payment therefore from available assets. (As added by R.A. 7400, 13 April 1992; renumbered from Sec. 9-B by R.A. 9302, 12 August 2004) After the payment of all liabilities and claims against the closed bank, the Corporation shall pay any surplus dividends at the legal rate of interest from date

of takeover to date of distribution, to creditors and claimants of the closed bank in accordance with legal priority before distribution to the shareholders of the closed bank. (As added by R.A. 9302, 12 August 2004) PERMANENT INSURANCE FUND Section 9 (c) (Repealed by R.A. 9302, 12 August 2004) SECTION 13. To carry out the purposes of this Act, the permanent insurance fund shall be Three billion pesos (P3,000,000,000.00). (As amended by R.A. 9302, 12 August 2004) The Deposit Insurance Fund shall be the capital account of the Corporation and shall principally consist of the following: (i) the Permanent Insurance Fund; (ii) assessment collections, subject to the charges enumerated in Section 6 (d); (iii) reserves for insurance and financial assistance losses; and (iv) retained earnings: Provided, That the reserves for insurance and financial assistance losses and retained earnings shall be maintained at a reasonable level to ensure capital adequacy: Provided, further, That the Corporation may, within two (2) years from the passage of this Act, and every five (5) years thereafter, conduct a study on the need to adjust the amount of the Permanent Insurance Fund, insurance cover, assessment rate and assessment base, and thereafter make the necessary recommendation to Congress. For this purpose, the Corporation may hire the services of actuarial consultants to determine, among others, the affordability of assessment rates, analysis and evaluation of insurance risk, and advisability of imposing varying assessment rates or insurance cover of different bank categories. (As added by R.A. 9302, 12 August 2004) PAYMENT OF INSURED DEPOSITS Section 10 (b) (Amended by P.D. 1940, 27 June 1984; repealed by R.A. 9302, 12 August 2004) SECTION 14. Whenever an insured bank shall have been closed by the Monetary Board pursuant to Section 30 of R.A. 7653, payment of the insured deposits on such closed bank shall be made by the Corporation as soon as possible either (1) by cash or (2) by making available to each depositor a transferred deposit in another insured bank in an amount equal to insured deposit of such depositor: Provided, however, That the Corporation, in its discretion, may require proof of claims to be filed before paying the insured deposits, and that in any case where the Corporation is not satisfied as to the viability of a claim for an insured deposit, it may require final determination of a court of competent jurisdiction before paying such claim: Provided, further, That failure to settle the claim, within six (6) months from the date of filing of

claim for insured deposit, where such failure was due to grave abuse of discretion, gross negligence, bad faith, or malice, shall, upon conviction, subject the directors, officers or employees of the Corporation responsible for the delay, to imprisonment from six (6) months to one (1) year: Provided, furthermore, That the period shall not apply if the validity of the claim requires the resolution of issues of facts and or law by another office, body or agency including the case mentioned in the first proviso or by the Corporation together with such other office, body or agency. (As amended by R.A. 9302, 12 August 2004) SECTION 15. The Corporation, upon payment of any depositor as provided for in subsection (c) of this Section3, shall be subrogated to all rights of the depositor against the closed bank to the extent of such payment. Such subrogation shall include the right on the part of the Corporation to receive the same dividends and payments from the proceeds of the assets of such closed bank and recoveries on account of stockholders liability as would have been payable to the depositor on a claim for the insured deposits but, such depositor shall retain his claim for any uninsured portion of his deposit. All payments by the Corporation of insured deposits in closed banks partake of the nature of public funds, and as such, must be considered a preferred credit similar to taxes due to the National Government in the order of preference under Article 2244 of the New Civil Code: Provided, further, That this preference shall be likewise effective upon liquidation proceedings already commenced and pending as of the approval of this Act, where no distribution of assets has been made. (As amended by P.D. 1940, 27 June 1984; R.A. 7400, 13 April 1992; renumbered from Sec. 10(d) by R.A. 9302, 12 August 2004) SECTION 16. j. The Corporation shall commence the determination of insured deposits due the depositors of a closed bank upon its actual takeover of the closed bank. The Corporation shall give notice to the depositors of the closed bank of the insured deposits due them by whatever means deemed appropriate by the Board of Directors: Provided, That the Corporation shall publish the notice once a week for at least three (3) consecutive weeks in a newspaper of general circulation or, when appropriate, in a newspaper circulated in the community or communities where the closed bank or its branches are located. (As added by R.A. 9302, 12 August 2004) k. Payment of an insured deposit to any person by the Corporation shall discharge the Corporation, and payment of transferred deposit to any person by the new bank or by an insured bank in which a transferred deposit has been made

available shall discharge the Corporation and such new bank or other insured bank, to the same extent that payment to such person by the closed bank would have discharged it from liability for the insured deposit. (Renumbered from Sec. 11 (a) by R.A. 9302, 12 August 2004) l. Except as otherwise prescribed by the Board of Directors, neither the Corporation nor such other insured bank shall be required to recognize as the owner of any portion of a deposit appearing on the records of the closed bank under a name other than that of the claimant, any person whose name or interest as such owner is not disclosed on the records of such closed bank as part owner of said deposit, if such recognition would increase the aggregate amount of the insured deposits in such closed bank. (Renumbered from Sec. 11 (b) by R.A. 9302, 12 August 2004) m. The Corporation may withhold payment of such portion of the insured deposit of any depositor in a closed bank as may be required to provide for the payment of any liability of such depositor as a stockholder of the closed bank, or of any liability of such depositor to the closed bank or its receiver, which is not offset against a claim due from such bank, pending the determination and payment of such liability by such depositor or any other liable therefor. (Renumbered from Sec. 11 (c) by R.A. 9302, 12 August 2004) n. Unless otherwise waived by the Corporation, if the depositor in the closed bank shall fail to claim his insured deposits with the Corporation within two (2) years from actual takeover of the closed bank by the receiver, or does not enforce his claim filed with the corporation within two (2) years after the two-year period to file a claim as mentioned hereinabove, all rights of the depositor against the Corporation with respect to the insured deposit shall be barred; however, all rights of the depositor against the closed bank and its shareholders or the receivership estate to which the Corporation may have become subrogated, shall thereupon revert to the depositor. Thereafter, the Corporation shall be discharged from any liability on the insured deposit. (As amended by R.A. 9302, 12 August 2004) CORPORATE FUNDS SECTION 17. o. Money of the Corporation not otherwise employed shall be invested in obligations of the Republic of the Philippines or in obligations guaranteed as to principal and interest by the Republic of the Philippines. (As amended by R.A. 6037, 04 August 1969; renumbered from Sec. 12 by R.A. 9302, 12 August 2004)

p. The banking or checking accounts of the Corporation shall be kept with the Bangko Sentral ng Pilipinas, with the Philippine National Bank, or with any other bank designated as depository or fiscal agent of the Philippine government. (As amended by R.A. 9302, 12 August 2004) q. It is hereby declared to be the policy of the State that the Deposit Insurance Fund of the Corporation shall be preserved and maintained at all times. Accordingly, all tax obligations of the Corporation for a period of five (5) years reckoned from the date of effectivity of this Act shall be chargeable to the Tax Expenditure Fund (TEF) in the annual General Appropriations Act pursuant to the provisions of Executive Order No. 93, series of 1986; Provided, That, on the 6th year and thereafter, the Corporation shall be exempt from income tax, final withholding tax, value-added tax on assessments collected from member banks, and local taxes. (As added by R.A 9576, 29 April 2009) FINANCIAL ASSISTANCE r. When the Corporation has determined that an insured bank is in danger of closing, in order to prevent such closing, the Corporation, in the discretion of its Board of Directors, is authorized to make loans to, or purchase the assets of, or assume liabilities of, or make deposits in, such insured bank, upon such terms and condition as the Board of Directors may prescribe, when in the opinion of the Board of Directors, the continued operation of such bank is essential to provide adequate banking service in the community or maintain financial stability in the economy. (Renumbered from Sec. 17 (c) by R.A. 9576, 29 April 2009) The authority of the Corporation under the foregoing paragraph to extend financial assistance to, assume liabilities of, purchase the assets of an insured bank may also be exercised in the case of a closed insured bank if the Corporation finds that the resumption of operations of such bank is vital to the interests of the community, or a severe financial climate exists which threatens the stability of a number of banks possessing significant resources: Provided, That the reopening and resumption of operations of the closed bank shall be subject to the prior approval of the Monetary Board. (As amended by R.A. 7400, 13 April 1992) The Corporation may provide any corporation acquiring control of, merging or consolidating with or acquiring the assets of an insured bank in danger of closing in order to prevent such closing or of a closed insured bank in order to restore to normal operations, with such financial assistance as it could provide an insured bank under this subsection: Provided, That, within sixty (60) days from date of

assistance the Corporation shall submit a report thereof to the Monetary Board. (As amended by R.A. 7400, 13 April 1992) The Corporation, prior to the exercise of the powers under this Section, shall determine that actual payoff and liquidation thereof will be more expensive than the exercise of this power: Provided, That when the Monetary Board has determined that there are systemic consequences of a probable failure or closure of an insured bank, the Corporation may grant financial assistance to such insured bank in such amount as may be necessary to prevent its failure or closure and/or restore the insured bank to viable operations, under such terms and conditions as may be deemed necessary by the Board of Directors, subject to concurrence by the Monetary Board and without additional cost to the Deposit Insurance Fund. (As amended by R.A. 9302, 12 August 2004) A systemic risk refers to the possibility that failure of one bank to settle net transactions with other banks will trigger a chain reaction, depriving other banks of funds leading to a general shutdown of normal clearing and settlement activity. Systemic risk also means the likelihood of a sudden, unexpected collapse of confidence in a significant portion of the banking or financial system with potentially large real economic effects. Finally, the Corporation may not use its authority under this subsection to purchase the voting or common stock of an insured bank but it can enter into and enforce agreements that it determines to be necessary to protect its financial interests: Provided, That the financial assistance may take the form of equity or quasiequity of the insured bank as may be deemed necessary by the Board of Directors with concurrence by the Monetary Board: Provided, further, That the Corporation shall dispose of such equity as soon as practicable. (As amended by R.A. 9302, 12 August 2004) AUTHORITY TO BORROW SECTION 18. The Corporation is authorized to borrow from the Bangko Sentral ng Pilipinas and the Bangko Sentral is authorized to lend the Corporation on such terms as may be agreed upon by the Corporation and the Bangko Sentral, such funds as in the judgment of the Board of Directors of the Corporation are from time to time required for insurance purposes and financial assistance provided for in Section 17(d) of this Act: Provided, That any such loan as may be granted by the Bangko Sentral shall be consistent with monetary policy; Provided, further, That the rate of interest thereon shall be fixed by the Monetary Board but shall not exceed the treasury bill rate. (As amended/renumbered from Sec. 13 by R.A. 9302, 12 August 2004) When in the judgment of the Board of Directors the funds of the Corporation are not sufficient to provide for an emergency or urgent need to attain the purposes of this

Act, the Corporation is likewise authorized to borrow money, obtain loans or arrange credit lines or other credit accommodations from any bank designated as depository or fiscal agent of the Philippine Government: Provided, That such loan shall be of short-term duration. (As amended by R.A. 6037; P.D. 653, 01 February 1975; P.D. 1940, 27 June 1984; R.A. 7400, 13 April 1992) ISSUANCE OF BONDS, DEBENTURES AND OTHER OBLIGATIONS SECTION 19. With the approval of the President of the Philippines, the Corporation is authorized to issue bonds, debentures, and other obligations, both local or foreign, as may be necessary for purposes of providing liquidity for settlement of insured deposits in closed banks as well as for financial assistance as provided herein: Provided, That the Board of Directors shall determine the interest rates, maturity and other requirements of said obligations: Provided, further, That the Corporation shall provide for appropriate reserves for the redemption or retirement of said obligation. All notes, debentures, bonds, or such obligations issued by the Corporation shall be exempt from taxation both as to principal and interest, and shall be fully guaranteed by the Government of the Republic of the Philippines. Such guarantee, which in no case shall exceed two times the Deposit Insurance Fund as of date of the debt issuance, shall be expressed on the face thereof. The Board of Directors shall have the power to prescribe rules and regulations for the issuance, reissuance, servicing, placement and redemption of the bonds herein authorized to be issued as well as the registration of such bonds at the request of the holders thereof. (As amended by R.A.9576, 29 April 2009) REPORTS SECTION 20. s. The Corporation shall annually make a report of its operations to the Congress as soon as practicable after the 1st day of January in each year. (Renumbered from Sec. 15 (a) by R.A. 9302, 12 August 2004) t. The financial transactions of the Corporation shall be audited by the Commission on Audit in accordance with the principles and procedures applicable to commercial corporate transactions and under such rules and regulations as may be prescribed by the Commission on Audit. The audit shall be conducted at the place or places where accounts of the Corporation are normally kept. Except as to matters relating to the function of the 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, reports, files and all other papers,

things, or property belonging to or in use by the Corporation pertaining to its financial transactions and necessary to facilitate the audit, and they shall be afforded full facilities for verifying transactions with the balances or securities held by depositories, fiscal agents, and custodians. All such books, accounts, records, reports, files, papers, and property of the Corporation shall remain in possession and custody of the Corporation. (As amended/renumbered from Sec. 15 (b) by R.A. 9302, 12 August 2004) u. A report of the Audit for each fiscal year ending on June 30 shall be made by the Auditor General to the Congress not later than January 15 following the close of such fiscal year. On or before December 15 following such fiscal year, the Auditor General shall furnish the Corporation a short form report showing the financial position of the Corporation at the close of fiscal year. The report to the Congress shall set forth the scope of the audit and shall include a statement of assets and liabilities and surplus or deficit; a statement of surplus or deficit analysis; a statement of income and expenses; a statement of sources and application of funds and such comments and information as may be deemed necessary to inform Congress of the financial operations and condition of the Corporation, together with such recommendations with respect thereto as the Auditor General may deem advisable. The report shall also show specifically any program, expenditure, or other financial transactions or undertaking observed in the course of the audit, which in the opinion of the Auditor General, has been carried on or made without authority of law. A copy of each report shall be furnished to the President of the Philippines, to the Governor of the Bangko Sentral ng Pilipinas, and to the Corporation at the time submitted to the Congress. (As amended/renumbered from Sec. 15 (c) by R.A. 9302, 12 August 2004) SANCTIONS AND PENALTIES SECTION 21. v. Every insured bank shall display at each place of business maintained by it a sign or signs, and shall include a statement in all its advertisements to the effect that its deposits are insured by the Corporation: Provided, That the Board of Directors may exempt from this requirement advertisements which do not relate to deposits or when it is impractical to include such statement therein. The Board of Directors shall prescribe by regulations the forms of such signs and the manner of use. (As amended/renumbered from Sec. 16 (a) by R.A. 9302, 12 August 2004) w. No insured bank shall pay any dividend on its capital stock or interest on its capital notes or debentures (if such interest is required to be paid only out of net profits) or distribute any of its capital assets while it remains in default in the payment of any assessment due to the Corporation: Provided, That if such default is due to a dispute between the insured bank and the Corporation over the amount of such

assessment, this subsection shall not apply if such bank shall deposit security satisfactory to the Corporation for payment upon final determination of the issue. (As amended/renumbered from Sec. 16 (b) by R.A. 9302, 12 August 2004) x. Without prior written consent by the Corporation, no insured bank shall (1) merge or consolidate with any bank or institution or (2) assume liability to pay any deposits made in, or similar liabilities of, any bank or institution or (3) transfer assets to any bank or institution in consideration of the assumption of liabilities for any portion of the deposits made in such insured bank. (As amended by E.O. 890, 8 April 1983; renumbered from Sec. 16 (c) by R.A. 9302, 12 August 2004) y. The Corporation may require an insured bank to provide protection and indemnity against burglary, defalcation, losses arising from discharge of duties by, or particular acts of defaults of its directors, officers, or employees, and other similar insurable losses. The Board of Directors in consultation with the Bangko Sentral, shall determine the bonding requirement as it refers to directors, officers and employers of the insured bank as well as the form and amount of the bond. Whenever any insured bank refuses to comply with any such requirement the Corporation may contract for such protection and add the cost thereof to the assessment otherwise payable by such bank. (As amended by R.A. 7400, 13 April 1992; R.A. 9302, 12 August 2004) z. Any assessment payable by an insured bank under this Act shall be subject to payment of interest computed from the date such assessment became due and payable and at the legal rate for loans as prescribed by law or appropriate authority and in case of willful failure or refusal to pay such assessment and interest thereon, there shall be added a penalty equivalent to twice the amount of interest payable as computed herein for each day such violations continue, which the interest and penalty the Corporation may recover for its use: Provided, That the penalty shall not be applicable under the circumstances stated in the provisions of subsection (b) of this Section. (As amended by E.O. 890, 08 April 1983; R.A. 7400, 13 April 1992) aa. The penalty of prision mayor or a fine of not less than Fifty thousand pesos (P50,000.00) but not more than Two million pesos (P2,000,000.00), or both, at the discretion of the court, shall be imposed upon any director, officer, employee or agent of a bank: (As amended by R.A. 9302, 12 August 2004)

1. for any willful refusal to submit reports as required by law, rules and regulations; (As amended by R.A. 9302, 12 August 2004) 2. any unjustified refusal to permit examination and audit of the deposit records or the affairs of the institution; (As amended by R.A. 9302, 12 August 2004) 3. any willful making of a false statement or entry in any bank report or document required by the Corporation; (As amended by R.A. 9302, 12 August 2004) 4. submission of false material information in connection with or in relation to any financial assistance of the Corporation extended to the bank; (As added by R.A. 9302, 12 August, 2004) 5. splitting of deposits or creation of fictitious loans or deposit accounts. (As added by R.A. 9302, 12 August 2004) Splitting of deposits occurs whenever a deposit account with an outstanding balance of more than the statutory maximum amount of insured deposit maintained under the name of natural or juridical persons is broken down and transferred into two (2) or more accounts in the name/s of natural or juridical persons or entities who have no beneficial ownership on transferred deposits in their names within one hundred twenty (120) days immediately preceding or during a bankdeclared bank holiday, or immediately preceding a closure order issued by the Monetary Board of the Bangko Sentral ng Pilipinas for the purpose of availing of the maximum deposit insurance coverage; (As added by R.A. 9302, 12 August 2004; as amended by R.A. 9576, 29 April 2009) 6. refusal to allow the Corporation to take over a closed bank placed under its receivership or obstructing such action of the Corporation; (As added by R.A. 9302, 12 August 2004) 7. refusal to turn over or destroying or tampering bank records; (As added by R.A. 9302, 12 August 2004) 8. fraudulent disposal, transfer or concealment of any asset, property or liability of the closed bank under the receivership of the Corporation; (As added by R.A. 9302, 12 August 2004) 9. violation of, or causing any person to violate, the exemption from garnishment, levy, attachment or execution provided under this Act and the New Central Bank Act; (As added by R.A. 9302, 12 August 2004) 10. any willful failure or refusal to comply with, or violation of any provision of this Act, or commission of any other irregularities, and/or conducting business in an unsafe

or unsound manner as may be determined by the Board of Directors. (As amended by R.A. 9302, 12 August 2004) bb. The Board of Directors is hereby authorized to impose administrative fines for any act or omission enumerated in the preceding subsection, and for violation of any order, instruction, rule or regulation issued by the Corporation, against a bank and/or any of its directors, officers or agents responsible for such act, omission, or violation, in amounts as it may be determined to be appropriate, but in no case to exceed three times the amount of the damages or costs caused by the transaction for each day that the violation subsists, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the bank. (As amended by R.A. 9302, 12 August 2004) SECTION 22. No court, except the Court of Appeals, shall issue any temporary restraining order, preliminary injunction or preliminary mandatory injunction against the Corporation for any action under this Act. (As added by R.A. 9302, 12 August 2004) This prohibition shall apply in all cases, disputes or controversies instituted by a private party, the insured bank, or any shareholder of the insured bank. (As added by R.A. 9302, 12 August 2004) The Supreme Court may issue a restraining order or injunction when the matter is of extreme urgency involving a constitutional issue, such that unless a temporary restraining order is issued, grave injustice and irreparable injury will arise. The party applying for the issuance of a restraining order or injunction shall file a bond in an amount to be fixed by the Supreme Court, which bond shall accrue in favor of the Corporation if the court should finally decide that the applicant was not entitled to the relief sought. (As added by R.A. 9302, 12 August 2004) Any restraining order or injunction issued in violation of this Section is void and of no force and effect and any judge who has issued the same shall suffer the penalty of suspension of at least sixty (60) days without pay. (As added by R.A. 9302, 12 August 2004) SECTION 23. The Corporation may be reorganized by the Board of Directors by adopting if it so desires, an entirely new staffing pattern or organizational structure to suit the operations of the Corporation under this Act. No preferential or priority right shall be given to or enjoyed by any personnel for appointment to any position in the new staffing pattern nor shall any personnel be considered as having prior or vested rights with respect to retention in the Corporation or in any position which may be created in the new staffing pattern, even if he should be

the incumbent of a similar position prior to reorganization. The reorganization shall be completed within six (6) months after the effectivity of this Act. Personnel who are not retained are deemed separated from the service. (As added by R.A. 9302, 12 August 2004) SECTION 24. The Board of Directors is hereby authorized to provide separation incentives, and all those who shall retire or be separated from the service on account of reorganization under the preceding section shall be entitled to such incentives which shall be in addition to all gratuities and benefits to which they may be entitled under existing laws. (As added by R.A. 9302, 12 August 2004) SECTION 25. The words Central Bank and the Central Bank of the Philippines wherever they appear in Republic Act No. 3591, as amended, is hereby replaced with Bangko Sentral and/or Bangko Sentral ng Pilipinas, respectively. (As added by R.A. 9302, 12 August 2004) SECTION 26. Separability Clause. - If any provision or section of this Act or the application thereof to any person or circumstances is held invalid, the other provisions or sections of this Act, in the application of such provision or section to other persons or circumstances, shall not be affected thereby. (As added by R.A. 9302, 12 August 2004) SECTION 27. Repealing Clause. - All acts or parts of acts and executive orders, administrative orders, or parts thereof which are inconsistent with the provisions of this Act are hereby repealed. (As added by R.A. 9302, 12 August 2004) SECTION 28. Effectivity Clause4. - This Act shall take effect fifteen (15) days following the completion of its publication in the Official Gazette or in two (2) newspapers of general circulation. (As added by R.A. 9302, 12 August 2004) ____________________ 1 Section 1 of R.A. 9576 (29 April 2009) also provides: SECTION 1. Statement of State Policy and Objectives. It is hereby declared to be the policy of the State to strengthen the mandatory deposit insurance coverage system to generate, preserve, maintain faith and confidence in the countrys banking system, and protect it from illegal schemes and machinations. Towards this end, the government must extend all means and mechanisms necessary for the Philippine Deposit Insurance Corporation to effectively fulfill its vital task of promoting and safeguarding the interests of the depositing public by way of providing permanent and continuing insurance coverage on all insured deposits, and in helping develop a sound and stable banking system at all times.

Section 4 of R.A. 9576 (29 April 2009) further states: SEC. 4. The maximum deposit insurance coverage of Five Hundred Thousand Pesos (P500,000.00) provided in Section 4(g) of Republic Act 3591, as amended herein, shall be paid by the Corporation: Provided, That, for the first three (3) years from the effectivity of this Act, the first Two Hundred Fifty Thousand Pesos (P250,000.00) of the deposit insurance coverage shall be for the account of the Corporation, and those in excess of Two Hundred Fifty Thousand Pesos (P250,000.00) but not more than Five Hundred Thousand Pesos (P500,000.00) shall be for the account of the National Government. The Congress shall annually appropriate the necessary funding to reimburse the Corporation for any payment to insured depositors paid in excess of Two Hundred Fifty Thousand Pesos (P250,000.00).
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Section 15 was formerly Section 10 (d) of R.A. 3591, as amended by R.A. 7400. Subsection (c) refers to Section 10 (c) of R.A. 3591, as amended by R.A. 7400 which has been renumbered to Section 14 by R.A. 9302
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Section 13 of R.A. 9576 (1 June 2009) also states: SEC. 13. Joint Congressional Oversight Committee. There is hereby created a joint congressional committee to oversee the implementation of this Act. The committee shall be composed of the chairpersons of the Senate Committee on Banks, Financial Institutions and Currencies and the Committee on Finance and five (5) senators to be appointed by the President of the Senate, and the chairpersons of the House Committee on Banks and Financial Intermediaries and the Committee on Appropriations and five (5) members to be appointed by the Speaker of the House of Representatives.

AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES [ACT NO. 3135, as amended by RA No. 4118] SECTION 1. When a sale is made under a special power inserted in or attached to any real-estate mortgage hereafter made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following election shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision for the same is made in the power. SECTION 2. Said sale cannot be made legally outside of the province in which the property sold is situated; and in case the place within said province in which the sale is to be made is subject to stipulation, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof is situated. SECTION 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. SECTION 4. The sale shall be made at public auction, between the hours or nine in the morning and four in the afternoon; and shall be under the direction of the sheriff of the province, the justice or auxiliary justice of the peace of the municipality in which such sale has to be made, or a notary public of said municipality, who shall be entitled to collect a fee of five pesos each day of actual work performed, in addition to his expenses. SECTION 5. At any sale, the creditor, trustee, or other persons authorized to act for the creditor, may participate in the bidding and purchase under the same conditions as any other bidder, unless the contrary has been expressly provided in the mortgage or trust deed under which the sale is made. Section 6. In all cases in which an extrajudicial sale is made under the special power herein before referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.

Section 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twentyeight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately. (As amended by Act No. 4118, approved Dec. 7, 1933) Section 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninetysix; and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal. Section 9. When the property is redeemed after the purchaser has been given possession, the redeemer shall be entitled to deduct from the price of redemption any rentals that said purchaser may have collected in case the property or any part thereof was rented; if the purchaser occupied the property as his own dwelling, it being town property, or used it gainfully, it being rural property, the redeemer may deduct from the price the interest of one per centum per month provided for

in section four hundred and sixty-five of the Code of Civil Procedure. (note: Secs7-9 are new provisions, as amended by Act No. 4118, approved Dec. 7, 1933) SECTION 10. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately. (Note: The number of the present Sec7 of said Act No. 3135 is hereby changed, making it Sec 10, as amended by Act No. 4118, approved Dec. 7, 1933) Approved: March 6, 1924 AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF CREDIT. [REPUBLIC ACT No. 3765] Section 1. This Act shall be known as the "Truth in Lending Act." Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. Section 3. As used in this Act, the term (1) "Board" means the Monetary Board of the Central Bank of the Philippines.

(2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect. (3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may be regulation prescribe. (4) "Creditor" means any person engaged in the business of extending credit (including any person who as a regular business practice make loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge. (5) "Person" means any individual, corporation, partnership, association, or other organized group of persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof, or any other government, or of any of its political subdivisions, or any agency of the foregoing. Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. Section 5. The Board shall prescribe such rules and regulations as may be necessary or proper in carrying out the provisions of this Act. Any rule or regulation prescribed hereunder may contain such classifications and differentiations as in the judgment of the Board are necessary or proper to effectuate the purposes of this Act or to prevent circumvention or evasion, or to facilitate the enforcement of this Act, or any rule or regulation issued thereunder. Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined by the court. (b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability of any contract or transactions. (c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. (d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any agency or any political subdivision thereof. (e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto. Section 7. This Act shall become effective upon approval. Approved: June 22, 1963 2004 Rules on Notarial Practice [A.M. No. 02-8-13-SC] RESOLUTION Acting on the compliance dated 05 July 2004 and on the proposed Rules on Notarial Practice of 2004 submitted by the Sub-Committee for the Study, Drafting and Formulation of the Rules Governing the Appointment of Notaries Public and the Performance and Exercise of Their Official Functions, of the Committees on Revision of the Rules of Court and on Legal Education and Bar Matters, the Court Resolved to APPROVE the proposed Rules on Notarial Practice of 2004, with modifications, thus: RULE I IMPLEMENTATION SECTION 1. Title. - These Rules shall be known as the 2004 Rules on Notarial Practice. SEC. 2. Purposes. - These Rules shall be applied and construed to advance the following purposes: (a) to promote, serve, and protect public interest;chan robles virtual law library (b) to simplify, clarify, and modernize the rules governing notaries public; and (c) to foster ethical conduct among notaries public.chan robles virtual law library SEC. 3. Interpretation. - Unless the context of these Rules otherwise indicates, words in the singular include the plural, and words in the plural include the singular. RULE II DEFINITIONS

SECTION 1. Acknowledgment. - Acknowledgment refers to an act in which an individual on a single occasion: (a) appears in person before the notary public and presents an integrally complete instrument or document; (b) is attested to be personally known to the notary public or identified by the notary public through competent evidence of identity as defined by these Rules; and (c) represents to the notary public that the signature on the instrument or document was voluntarily affixed by him for the purposes stated in the instrument or document, declares that he has executed the instrument or document as his free and voluntary act and deed, and, if he acts in a particular representative capacity, that he has the authority to sign in that capacity. SEC. 2. Affirmation or Oath. - The term Affirmation or Oath refers to an act in which an individual on a single occasion:chan robles virtual law library (a) appears in person before the notary public;chan robles virtual law library (b) is personally known to the notary public or identified by the notary public through competent evidence of identity as defined by these Rules; andchan robles virtual law library (c) avows under penalty of law to the whole truth of the contents of the instrument or document. SEC. 3. Commission. - Commission refers to the grant of authority to perform notarial acts and to the written evidence of the authority. SEC. 4. Copy Certification. - Copy Certification refers to a notarial act in which a notary public: (a) is presented with an instrument or document that is neither a vital record, a public record, nor publicly recordable; (b) copies or supervises the copying of the instrument or document; (c) compares the instrument or document with the copy; and (d) determines that the copy is accurate and complete. SEC. 5. Notarial Register. - Notarial Register refers to a permanently bound book with numbered pages containing a chronological record of notarial acts performed by a notary public.chan robles SEC. 6. Jurat. - Jurat refers to an act in which an individual on a single occasion: (a) appears in person before the notary public and presents an instrument or document; (b) is personally known to the notary public or identified by the notary public through competent evidence of identity as defined by these Rules;chan robles virtual law

library (c) signs the instrument or document in the presence of the notary; and (d) takes an oath or affirmation before the notary public as to such instrument or document. SEC. 7. Notarial Act and Notarization. - Notarial Act and Notarization refer to any act that a notary public is empowered to perform under these Rules. SEC. 8. Notarial Certificate. - Notarial Certificate refers to the part of, or attachment to, a notarized instrument or document that is completed by the notary public, bears the notary's signature and seal, and states the facts attested to by the notary public in a particular notarization as provided for by these Rules.chan robles virtual law library SEC. 9. Notary Public and Notary. - Notary Public and Notary refer to any person commissioned to perform official acts under these Rules. SEC. 10. Principal. - Principal refers to a person appearing before the notary public whose act is the subject of notarization.chan robles virtual law library SEC. 11. Regular Place of Work or Business. - The term regular place of work or business refers to a stationary office in the city or province wherein the notary public renders legal and notarial services.chan robles virtual law library SEC. 12. Competent Evidence of Identity. - The phrase competent evidence of identity refers to the identification of an individual based on: (a) at least one current identification document issued by an official agency bearing the photograph and signature of the individual; orchan robles virtual law library (b) the oath or affirmation of one credible witness not privy to the instrument, document or transaction who is personally known to the notary public and who personally knows the individual, or of two credible witnesses neither of whom is privy to the instrument, document or transaction who each personally knows the individual and shows to the notary public documentary identification. SEC. 13. Official Seal or Seal. - Official seal or Seal refers to a device for affixing a mark, image or impression on all papers officially signed by the notary public conforming the requisites prescribed by these Rules. SEC. 14. Signature Witnessing. - The term signature witnessing refers to a notarial act in which an individual on a single occasion:chan robles virtual law library

(a) appears in person before the notary public and presents an instrument or document; (b) is personally known to the notary public or identified by the notary public through competent evidence of identity as defined by these Rules; andchan robles virtual law library (c) signs the instrument or document in the presence of the notary public. SEC. 15. Court. - Court refers to the Supreme Court of the Philippines. SEC. 16. Petitioner. - Petitioner refers to a person who applies for a notarial commission. SEC. 17. Office of the Court Administrator. - Office of the Court Administrator refers to the Office of the Court Administrator of the Supreme Court. SEC. 18. Executive Judge. - Executive Judge refers to the Executive Judge of the Regional Trial Court of a city or province who issues a notarial commission. SEC. 19. Vendor. - Vendor under these Rules refers to a seller of a notarial seal and shall include a wholesaler or retailer.chan robles virtual law library SEC. 20. Manufacturer. - Manufacturer under these Rules refers to one who produces a notarial seal and shall include an engraver and seal maker.chan robles virtual law library RULE III COMMISSIONING OF NOTARY PUBLIC SECTION 1. Qualifications. - A notarial commission may be issued by an Executive Judge to any qualified person who submits a petition in accordance with these Rules.chan robles virtual law library To be eligible for commissioning as notary public, the petitioner: (1) must be a citizen of the Philippines;chan robles virtual law library (2) must be over twenty-one (21) years of age;chan robles virtual law library (3) must be a resident in the Philippines for at least one (1) year and maintains a regular place of work or business in the city or province where the commission is to be issued;chan robles virtual law library (4) must be a member of the Philippine Bar in good standing with clearances from the Office of the Bar Confidant of the Supreme Court and the Integrated Bar of the Philippines; and (5) must not have been convicted in the first instance of any crime involving moral turpitude.

SEC. 2. Form of the Petition and Supporting Documents. - Every petition for a notarial commission shall be in writing, verified, and shall include the following: (a) a statement containing the petitioner's personal qualifications, including the petitioner's date of birth, residence, telephone number, professional tax receipt, roll of attorney's number and IBP membership number; (b) certification of good moral character of the petitioner by at least two (2) executive officers of the local chapter of the Integrated Bar of the Philippines where he is applying for commission; (c) proof of payment for the filing of the petition as required by these Rules; and (d) three (3) passport-size color photographs with light background taken within thirty (30) days of the application. The photograph should not be retouched. The petitioner shall sign his name at the bottom part of the photographs. SEC. 3. Application Fee. - Every petitioner for a notarial commission shall pay the application fee as prescribed in the Rules of Court.chan robles virtual law library SEC. 4. Summary Hearing on the Petition. - The Executive Judge shall conduct a summary hearing on the petition and shall grant the same if: (a) the petition is sufficient in form and substance; (b) the petitioner proves the allegations contained in the petition; and (c) the petitioner establishes to the satisfaction of the Executive Judge that he has read and fully understood these Rules. The Executive Judge shall forthwith issue a commission and a Certificate of Authorization to Purchase a Notarial Seal in favor of the petitioner.chan robles virtual law library SEC. 5. Notice of Summary Hearing. (a) The notice of summary hearing shall be published in a newspaper of general circulation in the city or province where the hearing shall be conducted and posted in a conspicuous place in the offices of the Executive Judge and of the Clerk of Court. The cost of the publication shall be borne by the petitioner. The notice may include more than one petitioner. (b) The notice shall be substantially in the following form: NOTICE OF HEARING Notice is hereby given that a summary hearing on the petition for notarial commission of (name of petitioner) shall be held on (date) at (place) at (time). Any person who has any cause or reason to object to the grant of the petition

may file a verified written opposition thereto, received by the undersigned before the date of the summary hearing.chan robles virtual law library _____________________ Executive Judge SEC. 6. Opposition to Petition. - Any person who has any cause or reason to object to the grant of the petition may file a verified written opposition thereto. The opposition must be received by the Executive Judge before the date of the summary hearing.chan robles virtual law library SEC. 7. Form of Notarial Commission. - The commissioning of a notary public shall be in a formal order signed by the Executive Judge substantially in the following form: REPUBLIC OF THE PHILIPPINES REGIONAL TRIAL COURT OF ______________ This is to certify that (name of notary public) of (regular place of work or business) in (city or province) was on this (date) day of (month) two thousand and (year) commissioned by the undersigned as a notary public, within and for the said jurisdiction, for a term ending the thirty-first day of December (year)chan robles virtual law library ________________________ Executive Judge SEC. 8. Period Of Validity of Certificate of Authorization to Purchase a Notarial Seal. The Certificate of Authorization to Purchase a Notarial Seal shall be valid for a period of three (3) months from date of issue, unless extended by the Executive Judge. A mark, image or impression of the seal that may be purchased by the notary public pursuant to the Certificate shall be presented to the Executive Judge for approval prior to use. SEC. 9. Form of Certificate of Authorization to Purchase a Notarial Seal. - The Certificate of Authorization to Purchase a Notarial Seal shall substantially be in the following form: REPUBLIC OF THE PHILIPPINES REGIONAL TRIAL COURT OF_____________chan robles virtual law library CERTIFICATE OF AUTHORIZATION TO PURCHASE A NOTARIAL SEALchan robles virtual law library This is to authorize (name of notary public) of (city or province) who was commissioned by the undersigned as a notary public, within and for the said

jurisdiction, for a term ending, the thirty-first of December (year) to purchase a notarial seal.chan robles virtual law library Issued this (day) of (month) (year). ________________________ Executive Judge SEC. 10. Official Seal of Notary Public. - Every person commissioned as notary public shall have only one official seal of office in accordance with these Rules. SEC. 11. Jurisdiction and Term. - A person commissioned as notary public may perform notarial acts in any place within the territorial jurisdiction of the commissioning court for a period of two (2) years commencing the first day of January of the year in which the commissioning is made, unless earlier revoked or the notary public has resigned under these Rules and the Rules of Court.chan robles virtual law library SEC. 12. Register of Notaries Public. - The Executive Judge shall keep and maintain a Register of Notaries Public in his jurisdiction which shall contain, among others, the dates of issuance or revocation or suspension of notarial commissions, and the resignation or death of notaries public. The Executive Judge shall furnish the Office of the Court Administrator information and data recorded in the register of notaries public. The Office of the Court Administrator shall keep a permanent, complete and updated database of such records.chan robles virtual law library SEC. 13. Renewal of Commission. - A notary public may file a written application with the Executive Judge for the renewal of his commission within forty-five (45) days before the expiration thereof. A mark, image or impression of the seal of the notary public shall be attached to the application. Failure to file said application will result in the deletion of the name of the notary public in the register of notaries public. The notary public thus removed from the Register of Notaries Public may only be reinstated therein after he is issued a new commission in accordance with these Rules.chan robles virtual law library SEC. 14. Action on Application for Renewal of Commission. - The Executive Judge shall, upon payment of the application fee mentioned in Section 3 above of this Rule, act on an application for the renewal of a commission within thirty (30) days from receipt thereof. If the application is denied, the Executive Judge shall state the reasons therefor.

RULE IV POWERS AND LIMITATIONS OF NOTARIES PUBLIC SECTION 1. Powers. - (a) A notary public is empowered to perform the following notarial acts: (1) acknowledgments; (2) oaths and affirmations; (3) jurats;chan robles virtual law library (4) signature witnessings; (5) copy certifications; and (6) any other act authorized by these Rules. (b) A notary public is authorized to certify the affixing of a signature by thumb or other mark on an instrument or document presented for notarization if: (1) the thumb or other mark is affixed in the presence of the notary public and of two (2) disinterested and unaffected witnesses to the instrument or document; (2) both witnesses sign their own names in addition to the thumb or other mark; (3) the notary public writes below the thumb or other mark: "Thumb or Other Mark affixed by (name of signatory by mark) in the presence of (names and addresses of witnesses) and undersigned notary public"; andchan robles virtual law library (4) the notary public notarizes the signature by thumb or other mark through an acknowledgment, jurat, or signature witnessing. (c) A notary public is authorized to sign on behalf of a person who is physically unable to sign or make a mark on an instrument or document if: (1) the notary public is directed by the person unable to sign or make a mark to sign on his behalf; (2) the signature of the notary public is affixed in the presence of two disinterested and unaffected witnesses to the instrument or document; (3) both witnesses sign their own names ; (4) the notary public writes below his signature: Signature affixed by notary in presence of (names and addresses of person and two *2+ witnesses); and (5) the notary public notarizes his signature by acknowledgment or jurat. SEC. 2. Prohibitions. - (a) A notary public shall not perform a notarial act outside his regular place of work or business; provided, however, that on certain exceptional occasions or situations, a notarial act may be performed at the request of the parties in the following sites located within his territorial jurisdiction:chan robles virtual law library

(1) public offices, convention halls, and similar places where oaths of office may be administered; (2) public function areas in hotels and similar places for the signing of instruments or documents requiring notarization; (3) hospitals and other medical institutions where a party to an instrument or document is confined for treatment; and (4) any place where a party to an instrument or document requiring notarization is under detention. (b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document (1) is not in the notary's presence personally at the time of the notarization; and (2) is not personally known to the notary public or otherwise identified by the notary public through competent evidence of identity as defined by these Rules.chan robles virtual law library SEC. 3. Disqualifications. - A notary public is disqualified from performing a notarial act if he: (a) is a party to the instrument or document that is to be notarized;chan robles virtual law library (b) will receive, as a direct or indirect result, any commission, fee, advantage, right, title, interest, cash, property, or other consideration, except as provided by these Rules and by law; or (c) is a spouse, common-law partner, ancestor, descendant, or relative by affinity or consanguinity of the principal within the fourth civil degree.chan robles virtual law library SEC. 4. Refusal to Notarize. - A notary public shall not perform any notarial act described in these Rules for any person requesting such an act even if he tenders the appropriate fee specified by these Rules if: (a) the notary knows or has good reason to believe that the notarial act or transaction is unlawful or immoral; (b) the signatory shows a demeanor which engenders in the mind of the notary public reasonable doubt as to the former's knowledge of the consequences of the transaction requiring a notarial act; and (c) in the notary's judgment, the signatory is not acting of his or her own free will. SEC. 5. False or Incomplete Certificate. - A notary public shall not:chan robles virtual law library

(a) execute a certificate containing information known or believed by the notary to be false. (b) affix an official signature or seal on a notarial certificate that is incomplete.chan robles virtual law library SEC. 6. Improper Instruments or Documents. - A notary public shall not notarize: (a) a blank or incomplete instrument or document; orchan robles virtual law library (b) an instrument or document without appropriate notarial certification. RULE V FEES OF NOTARY PUBLIC SECTION 1. Imposition and Waiver of Fees. - For performing a notarial act, a notary public may charge the maximum fee as prescribed by the Supreme Court unless he waives the fee in whole or in part. chan robles virtual law library SEC. 2. Travel Fees and Expenses. - A notary public may charge travel fees and expenses separate and apart from the notarial fees prescribed in the preceding section when traveling to perform a notarial act if the notary public and the person requesting the notarial act agree prior to the travel. SEC. 3. Prohibited Fees. No fee or compensation of any kind, except those expressly prescribed and allowed herein, shall be collected or received for any notarial service. SEC. 4. Payment or Refund of Fees. - A notary public shall not require payment of any fees specified herein prior to the performance of a notarial act unless otherwise agreed upon.chan robles virtual law library Any travel fees and expenses paid to a notary public prior to the performance of a notarial act are not subject to refund if the notary public had already traveled but failed to complete in whole or in part the notarial act for reasons beyond his control and without negligence on his part. SEC. 5. Notice of Fees. - A notary public who charges a fee for notarial services shall issue a receipt registered with the Bureau of Internal Revenue and keep a journal of notarial fees. He shall enter in the journal all fees charged for services rendered.chan robles virtual law library A notary public shall post in a conspicuous place in his office a complete schedule of chargeable notarial fees.

RULE VI NOTARIAL REGISTER SECTION 1. Form of Notarial Register. - (a) A notary public shall keep, maintain, protect and provide for lawful inspection as provided in these Rules, a chronological official notarial register of notarial acts consisting of a permanently bound book with numbered pages.chan robles virtual law library The register shall be kept in books to be furnished by the Solicitor General to any notary public upon request and upon payment of the cost thereof. The register shall be duly paged, and on the first page, the Solicitor General shall certify the number of pages of which the book consists. For purposes of this provision, a Memorandum of Agreement or Understanding may be entered into by the Office of the Solicitor General and the Office of the Court Administrator.chan robles virtual law library (b) A notary public shall keep only one active notarial register at any given time. SEC. 2. Entries in the Notarial Register. - (a) For every notarial act, the notary shall record in the notarial register at the time of notarization the following:chan robles virtual law library (1) the entry number and page number;chan robles virtual law library (2) the date and time of day of the notarial act; (3) the type of notarial act;chan robles virtual law library (4) the title or description of the instrument, document or proceeding; (5) the name and address of each principal;chan robles virtual law library (6) the competent evidence of identity as defined by these Rules if the signatory is not personally known to the notary;chan robles virtual law library (7) the name and address of each credible witness swearing to or affirming the person's identity; (8) the fee charged for the notarial act; (9) the address where the notarization was performed if not in the notary's regular place of work or business; and (10) any other circumstance the notary public may deem of significance or relevance. (b) A notary public shall record in the notarial register the reasons and circumstances for not completing a notarial act. (c) A notary public shall record in the notarial register the circumstances of any request to inspect or copy an entry in the notarial register, including the

requester's name, address, signature, thumbmark or other recognized identifier, and evidence of identity. The reasons for refusal to allow inspection or copying of a journal entry shall also be recorded. (d) When the instrument or document is a contract, the notary public shall keep an original copy thereof as part of his records and enter in said records a brief description of the substance thereof and shall give to each entry a consecutive number, beginning with number one in each calendar year. He shall also retain a duplicate original copy for the Clerk of Court. (e) The notary public shall give to each instrument or document executed, sworn to, or acknowledged before him a number corresponding to the one in his register, and shall also state on the instrument or document the page/s of his register on which the same is recorded. No blank line shall be left between entries. (f) In case of a protest of any draft, bill of exchange or promissory note, the notary public shall make a full and true record of all proceedings in relation thereto and shall note therein whether the demand for the sum of money was made, by whom, when, and where; whether he presented such draft, bill or note; whether notices were given, to whom and in what manner; where the same was made, when and to whom and where directed; and of every other fact touching the same. (g) At the end of each week, the notary public shall certify in his notarial register the number of instruments or documents executed, sworn to, acknowledged, or protested before him; or if none, this certificate shall show this fact. (h) A certified copy of each month's entries and a duplicate original copy of any instrument acknowledged before the notary public shall, within the first ten (10) days of the month following, be forwarded to the Clerk of Court and shall be under the responsibility of such officer. If there is no entry to certify for the month, the notary shall forward a statement to this effect in lieu of certified copies herein required. SEC. 3. Signatures and Thumbmarks. - At the time of notarization, the notary's notarial register shall be signed or a thumb or other mark affixed by each: (a) principal; (b) credible witness swearing or affirming to the identity of a principal; and (c) witness to a signature by thumb or other mark, or to a signing by the notary public on behalf of a person physically unable to sign. SEC. 4. Inspection, Copying and Disposal. - (a) In the notary's presence, any person may inspect an entry in the notarial register, during regular business hours, provided; (1) the person's identity is personally known to the notary public or proven through competent evidence of identity as defined in these Rules;

(2) the person affixes a signature and thumb or other mark or other recognized identifier, in the notarial register in a separate, dated entry; (3) the person specifies the month, year, type of instrument or document, and name of the principal in the notarial act or acts sought; and (4) the person is shown only the entry or entries specified by him. (b) The notarial register may be examined by a law enforcement officer in the course of an official investigation or by virtue of a court order. (c) If the notary public has a reasonable ground to believe that a person has a criminal intent or wrongful motive in requesting information from the notarial register, the notary shall deny access to any entry or entries therein. SEC. 5. Loss, Destruction or Damage of Notarial Register. - (a) In case the notarial register is stolen, lost, destroyed, damaged, or otherwise rendered unusable or illegible as a record of notarial acts, the notary public shall, within ten (10) days after informing the appropriate law enforcement agency in the case of theft or vandalism, notify the Executive Judge by any means providing a proper receipt or acknowledgment, including registered mail and also provide a copy or number of any pertinent police report. (b) Upon revocation or expiration of a notarial commission, or death of the notary public, the notarial register and notarial records shall immediately be delivered to the office of the Executive Judge. SEC. 6. Issuance of Certified True Copies. - The notary public shall supply a certified true copy of the notarial record, or any part thereof, to any person applying for such copy upon payment of the legal fees. RULE VII SIGNATURE AND SEAL OF NOTARY PUBLIC SECTION 1. Official Signature. In notarizing a paper instrument or document, a notary public shall: (a) sign by hand on the notarial certificate only the name indicated and as appearing on the notary's commission;chan robles virtual law library (b) not sign using a facsimile stamp or printing device; and (c) affix his official signature only at the time the notarial act is performed. SEC. 2. Official Seal. - (a) Every person commissioned as notary public shall have a seal of office, to be procured at his own expense, which shall not be possessed or owned by any other person. It shall be of metal, circular in shape, two inches in diameter, and shall have the name of the city or province and the word Philippines and his own name on the margin and the roll of attorney's number

on the face thereof, with the words "notary public" across the center. A mark, image or impression of such seal shall be made directly on the paper or parchment on which the writing appears. (b) The official seal shall be affixed only at the time the notarial act is performed and shall be clearly impressed by the notary public on every page of the instrument or document notarized.chan robles virtual law library (c) When not in use, the official seal shall be kept safe and secure and shall be accessible only to the notary public or the person duly authorized by him.chan robles virtual law library (d) Within five (5) days after the official seal of a notary public is stolen, lost, damaged or other otherwise rendered unserviceable in affixing a legible image, the notary public, after informing the appropriate law enforcement agency, shall notify the Executive Judge in writing, providing proper receipt or acknowledgment, including registered mail, and in the event of a crime committed, provide a copy or entry number of the appropriate police record. Upon receipt of such notice, if found in order by the Executive Judge, the latter shall order the notary public to cause notice of such loss or damage to be published, once a week for three (3) consecutive weeks, in a newspaper of general circulation in the city or province where the notary public is commissioned. Thereafter, the Executive Judge shall issue to the notary public a new Certificate of Authorization to Purchase a Notarial Seal. (e) Within five (5) days after the death or resignation of the notary public, or the revocation or expiration of a notarial commission, the official seal shall be surrendered to the Executive Judge and shall be destroyed or defaced in public during office hours. In the event that the missing, lost or damaged seal is later found or surrendered, it shall be delivered by the notary public to the Executive Judge to be disposed of in accordance with this section. Failure to effect such surrender shall constitute contempt of court. In the event of death of the notary public, the person in possession of the official seal shall have the duty to surrender it to the Executive Judge. SEC. 3. Seal Image. - The notary public shall affix a single, clear, legible, permanent, and photographically reproducible mark, image or impression of the official seal beside his signature on the notarial certificate of a paper instrument or document. SEC. 4. Obtaining and Providing Seal. - (a) A vendor or manufacturer of notarial seals may not sell said product without a written authorization from the Executive Judge. (b) Upon written application and after payment of the application fee, the Executive Judge may issue an authorization to sell to a vendor or manufacturer of notarial seals after verification and investigation of the latter's qualifications. The Executive Judge

shall charge an authorization fee in the amount of PhP 4,000 for the vendor and PhP 8,000 for the manufacturer. If a manufacturer is also a vendor, he shall only pay the manufacturer's authorization fee. (c) The authorization shall be in effect for a period of four (4) years from the date of its issuance and may be renewed by the Executive Judge for a similar period upon payment of the authorization fee mentioned in the preceding paragraph. (d) A vendor or manufacturer shall not sell a seal to a buyer except upon submission of a certified copy of the commission and the Certificate of Authorization to Purchase a Notarial Seal issued by the Executive Judge. A notary public obtaining a new seal as a result of change of name shall present to the vendor or manufacturer a certified copy of the Confirmation of the Change of Name issued by the Executive Judge. (e) Only one seal may be sold by a vendor or manufacturer for each Certificate of Authorization to Purchase a Notarial Seal. (f) After the sale, the vendor or manufacturer shall affix a mark, image or impression of the seal to the Certificate of Authorization to Purchase a Notarial Seal and submit the completed Certificate to the Executive Judge. Copies of the Certificate of Authorization to Purchase a Notarial Seal and the buyer's commission shall be kept in the files of the vendor or manufacturer for four (4) years after the sale. (g) A notary public obtaining a new seal as a result of change of name shall present to the vendor a certified copy of the order confirming the change of name issued by the Executive Judge. RULE VIII NOTARIAL CERTIFICATES SECTION 1. Form of Notarial Certificate. - The notarial form used for any notarial instrument or document shall conform to all the requisites prescribed herein, the Rules of Court and all other provisions of issuances by the Supreme Court and in applicable laws.chan robles virtual law library SEC. 2. Contents of the Concluding Part of the Notarial Certificate. The notarial certificate shall include the following: (a) the name of the notary public as exactly indicated in the commission; (b) the serial number of the commission of the notary public; (c) the words "Notary Public" and the province or city where the notary public is commissioned, the expiration date of the commission, the office address of the notary public; and

(d) the roll of attorney's number, the professional tax receipt number and the place and date of issuance thereof, and the IBP membership number. RULE IX CERTIFICATE OF AUTHORITY OF NOTARIES PUBLIC SECTION 1. Certificate of Authority for a Notarial Act. - A certificate of authority evidencing the authenticity of the official seal and signature of a notary public shall be issued by the Executive Judge upon request in substantially the following form:chan robles virtual law library CERTIFICATE OF AUTHORITY FOR A NOTARIAL ACT I, (name, title, jurisdiction of the Executive Judge), certify that (name of notary public), the person named in the seal and signature on the attached document, is a Notary Public in and for the (City/Municipality/Province) of the Republic of the Philippines and authorized to act as such at the time of the document's notarization.chan robles virtual law library IN WITNESS WHEREOF, I have affixed below my signature and seal of this office this (date) day of (month) (year).chan robles virtual law library _________________ (official signature) (seal of Executive Judge) RULE X CHANGES OF STATUS OF NOTARY PUBLIC SECTION 1. Change of Name and Address. Within ten (10) days after the change of name of the notary public by court order or by marriage, or after ceasing to maintain the regular place of work or business, the notary public shall submit a signed and dated notice of such fact to the Executive Judge. The notary public shall not notarize until: (a) he receives from the Executive Judge a confirmation of the new name of the notary public and/or change of regular place of work or business; and (b) a new seal bearing the new name has been obtained. The foregoing notwithstanding, until the aforementioned steps have been completed, the notary public may continue to use the former name or regular place of work or

business in performing notarial acts for three (3) months from the date of the change, which may be extended once for valid and just cause by the Executive Judge for another period not exceeding three (3) months. SEC. 2. Resignation. - A notary public may resign his commission by personally submitting a written, dated and signed formal notice to the Executive Judge together with his notarial seal, notarial register and records. Effective from the date indicated in the notice, he shall immediately cease to perform notarial acts. In the event of his incapacity to personally appear, the submission of the notice may be performed by his duly authorized representative. SEC. 3. Publication of Resignation. - The Executive Judge shall immediately order the Clerk of Court to post in a conspicuous place in the offices of the Executive Judge and of the Clerk of Court the names of notaries public who have resigned their notarial commissions and the effective dates of their resignation. RULE XI REVOCATION OF COMMISSION AND DISCIPLINARY SANCTIONS SECTION 1. Revocation and Administrative Sanctions. - (a) The Executive Judge shall revoke a notarial commission for any ground on which an application for a commission may be denied.chan robles virtual law library (b) In addition, the Executive Judge may revoke the commission of, or impose appropriate administrative sanctions upon, any notary public who: (1) fails to keep a notarial register; (2) fails to make the proper entry or entries in his notarial register concerning his notarial acts; (3) fails to send the copy of the entries to the Executive Judge within the first ten (10) days of the month following; (4) fails to affix to acknowledgments the date of expiration of his commission; (5) fails to submit his notarial register, when filled, to the Executive Judge; (6) fails to make his report, within a reasonable time, to the Executive Judge concerning the performance of his duties, as may be required by the judge; (7) fails to require the presence of a principal at the time of the notarial act; (8) fails to identify a principal on the basis of personal knowledge or competent evidence; (9) executes a false or incomplete certificate under Section 5, Rule IV; (10) knowingly performs or fails to perform any other act prohibited or mandated by these Rules; and (11) commits any other dereliction or act which in the judgment of the Executive

Judge constitutes good cause for revocation of commission or imposition of administrative sanction. (c) Upon verified complaint by an interested, affected or aggrieved person, the notary public shall be required to file a verified answer to the complaint. If the answer of the notary public is not satisfactory, the Executive Judge shall conduct a summary hearing. If the allegations of the complaint are not proven, the complaint shall be dismissed. If the charges are duly established, the Executive Judge shall impose the appropriate administrative sanctions. In either case, the aggrieved party may appeal the decision to the Supreme Court for review. Pending the appeal, an order imposing disciplinary sanctions shall be immediately executory, unless otherwise ordered by the Supreme Court. (d) The Executive Judge may motu proprio initiate administrative proceedings against a notary public, subject to the procedures prescribed in paragraph (c) above and impose the appropriate administrative sanctions on the grounds mentioned in the preceding paragraphs (a) and (b). SEC. 2. Supervision and Monitoring of Notaries Public. - The Executive Judge shall at all times exercise supervision over notaries public and shall closely monitor their activities.chan robles virtual law library SEC. 3. Publication of Revocations and Administrative Sanctions. - The Executive Judge shall immediately order the Clerk of Court to post in a conspicuous place in the offices of the Executive Judge and of the Clerk of Court the names of notaries public who have been administratively sanctioned or whose notarial commissions have been revoked. SEC. 4. Death of Notary Public. - If a notary public dies before fulfilling the obligations in Section 4(e), Rule VI and Section 2(e), Rule VII, the Executive Judge, upon being notified of such death, shall forthwith cause compliance with the provisions of these sections.chan robles virtual law library RULE XII SPECIAL PROVISIONS SECTION 1. Punishable Acts. - The Executive Judge shall cause the prosecution of any person who: (a) knowingly acts or otherwise impersonates a notary public;chan robles virtual law library (b) knowingly obtains, conceals, defaces, or destroys the seal, notarial register, or official records of a notary public; and

(c) knowingly solicits, coerces, or in any way influences a notary public to commit official misconduct. SEC 2. Reports to the Supreme Court. - The Executive Judge concerned shall submit semestral reports to the Supreme Court on discipline and prosecution of notaries public. RULE XIII REPEALING AND EFFECTIVITY PROVISIONS SECTION 1. Repeal. - All rules and parts of rules, including issuances of the Supreme Court inconsistent herewith, are hereby repealed or accordingly modified.chan robles virtual law library SEC. 2. Effective Date. - These Rules shall take effect on the first day of August 2004, and shall be published in a newspaper of general circulation in the Philippines which provides sufficiently wide circulation. Promulgated this 6th day of July, 2004.chan robles virtual law library Davide, Jr. C.J., Puno, Vitug, Panganiban, Quisumbing, Ynarez-Santiago, SandovalGutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna and Tinga, JJ.