Ktrl+ Commercial Law Review I
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REPUBLIC ACT No. 10142
(Financial Rehabilitation and Insolvency
Act (FRIA) of 2010)
IMPORTANT MATTERS
FRIA Powers of the Securities and Exchange
Commission (SEC) – The regulatory powers of
the SEC under Section 6 of Presidential Decree
No. 902-A, as amended, with respect to any
dissolution and liquidation proceeding initiated
and heard before it shall not be superseded by
the FRIA Law. It means that, RTC and SEC has
concurrent jurisdiction when it comes to
LIQUIDATION.
Court Supervised Rehabilitation:
Petition for Rehabilitation:
Voluntary proceedings shall
refer to proceedings initiated by
the debtor.
Involuntary proceedings shall
refer to proceedings initiated by
creditors.
Petition for the approval of a pre-
negotiated Rehabilitation Plan:
The court shall have a maximum period
of one hundred twenty (120) days from
the date of the filing of the petition to
approve the Rehabilitation Plan. If the
court fails to act within the said period,
the Rehabilitation Plan shall be
deemed approved.
Petition to be declared in the state of
suspension of payments – For Individual
Debtors only. It is a petition when an individual
debtor possesses sufficient property to cover
all his debts but foreseeing the impossibility of
meeting them when they respectively fall due.
We do not talk about insolvency here but only a
method and manner of meeting payments of
debts. The debtor shall only be subjected to a
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Based on the Course Outline prepared by:
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further insolvency proceeding once he failed to
satisfy his obligation arising from this petition.
Petition for Voluntary Liquidation – For
Individual Debtors Only. It is a petition when an
individual debtor possesses insufficient
property and owing debts exceeding
PhP500,000.00 to cover his liabilities. The filing
of such petition shall be an act of insolvency;
hence, insolvency is conclusive in this case. We
talk about liquidation here.
Out-of-Court or Informal Restructuring
Agreements and Rehabilitation Plans:
Stand-still Period
Cram Down Effect – A
restructuring/workout agreement or
Rehabilitation Plan that is approved
pursuant to an informal workout
framework referred to in this chapter
shall have the same legal effect as
confirmation of a Rehabilitation Plan in
a Court Supervised Rehabilitation.
Rehabilitation receiver shall refer to the person
or persons, natural or juridical, initially
nominated by the petitioner, whether by the
creditor or the debtor, as the case may be, and,
thereafter, appointed as such by the court
which shall be entrusted with such powers and
duties as set forth herein. Any creditor or debtor
may also nominate a rehabilitation receiver per
the appropriate Commencement Order issued
by the court.
Commencement Order – It is an interlocutory
order, not subject to ordinary appeal. First and
foremost, issuance of a commencement order
commences the rehabilitation proceedings
proper.
Among others, it has the following salient
contents and effects: 1) it shall declare that the
debtor is under rehabilitation; 2) it shall appoint
a rehabilitation receiver who may or not be from
among the nominees of the petitioner/s, or it
shall state that any creditor or debtor who is not
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the petitioner, may nominate any other qualified
person to the position of rehabilitation receiver
at least 5 days before the initial hearing; 3) it
shall consolidate the resolution of all legal
proceedings by and against the debtor to the
court, however, the court may allow the
continuation of cases on other courts where the
debtor had initiated the suit; 4) it shall prevent
any seek of legal recourse against the debtor,
and any attempt thereof shall be sufficient to
support a finding of indirect contempt of court;
5) It shall waive the imposition of all taxes and
fees, including penalties, interests and charges
thereof until the approval of the Rehabilitation
Plan or dismissal of the petition, whichever is
earlier, in furtherance of the objectives of
rehabilitation; and finally, 6) it shall set the case
for initial hearing for the purpose of determining
whether there is substantial likelihood for the
debtor to be rehabilitated It does not declare the
insolvency of the debtor.
The Commencement Order shall be effective
for as long as there is a substantial likelihood
that the debtor will be successfully rehabilitated,
unless lifted by the court.
In determining whether there is substantial
likelihood for the debtor to be successfully
rehabilitated, the court shall ensure that the
following minimum requirements are met:
(a) The proposed Rehabilitation Plan submitted
complies with the minimum contents prescribed
by this Act;
(b) There is sufficient monitoring by the
rehabilitation receiver of the debtor's business
for the protection of creditors;
(c) The debtor has met with its creditors to the
extent reasonably possible in attempts to reach
consensus on the proposed Rehabilitation Plan;
(d) The rehabilitation receiver submits a report,
based on preliminary evaluation, stating that
the underlying assumptions and the goals
stated in the petitioner's Rehabilitation Plan are
realistic reasonable and reasonable or if not,
there is, in any case, a substantial likelihood for
the debtor to be successfully rehabilitated
because, among others:
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(1) there are sufficient assets with/which to
rehabilitate the debtor;
(2) there is sufficient cash flow to maintain the
operations of the debtor;
(3) the debtor's, partners, stockholders,
directors and officers have been acting in good
faith and which due diligence;
(4) the petition is not s sham filing intended only
to delay the enforcement of the rights of the
creditor's or of any group of creditors; and
(5) the debtor would likely be able to pursue a
viable Rehabilitation Plan;
(e) The petition, the Rehabilitation Plan and the
attachments thereto do not contain any
materially false or misleading statement;
(f) If the petitioner is the debtor, that the debtor
has met with its creditor/s representing at least
three-fourths (3/4) of its total obligations to the
extent reasonably possible and made a good
faith effort to reach a consensus on the
proposed Rehabilitation Plan if the petitioner/s
is/are a creditor or group of creditors, that/ the
petitioner/s has/have met with the debtor and
made a good faith effort to reach a consensus
on the proposed Rehabilitation Plan; and
(g) The debtor has not committed acts
misrepresentation or in fraud of its creditor/s or
a group of creditors.
Stay or Suspension Order – It is an order
included in the Commencement Order and has
the following effects: 1) it suspends all actions
or proceedings, in court or otherwise, for the
enforcement of claims against the debtor,
including execution and enforcement of any
judgment, attachment, or other provisional
remedies against the debtor; 2) it prohibits the
debtor from disposing any of its properties
except in the ordinary course of business, and
payment of liabilities outstanding as of the
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Commencement Date subject to some
exceptions.
However, it shall not apply to: 1) cases already
pending appeal with the Supreme Court as of
the Commencement Date; 2) cases pending at
a specialized court or quasi-judicial agency
which, upon determination by the court, is
capable of resolving the claim more quickly,
fairly and efficiently than the court; 3)
enforcement of claims against sureties and
other persons solidarily liable with the debtor,
unless the property subject of a third party or
accommodation mortgage is necessary for he
rehabilitation as recommended by the
rehabilitation receiver; 4) any action
commenced for or against debtors which are
securities market participant for the recovery or
settlement of money claims and/or securities
entrusted by clients to the former in the ordinary
course of business; 5) any action involving
pledged securities of a debtor for the settlement
of securities transactions; 6) clearing and
settlement of financial transactions of the
debtor and actions for the reimbursement of the
same; 7) criminal actions against the debtor.
Any final and executory judgment arising from
cases 1) and 2) shall be referred to the
rehabilitation court for appropriate action. The
judgment from said quasi judicial agencies or
special courts shall be treated as non-disputed
claim.
Commencement date shall refer to the date on
which the court issues the Commencement
Order, which shall be retroactive to the date of
filing of the petition for voluntary or involuntary
proceedings.
Rehabilitation Plan shall refer to a plan by which
the financial well-being and viability of an
insolvent debtor can be restored using various
means including, but not limited to, debt
forgiveness, debt rescheduling, reorganization
or quasi-reorganization, dacion en pago, debt-
equity conversion and sale of the business (or
parts of it) as a going concern, or setting-up of
new business entity as prescribed in Section 62
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hereof, or other similar arrangements as may
be approved by the court or creditors.
Minimum Contents of a Rehabilitation Plan:
(a) financial goals and the procedures to
accomplish such goals;
(b) comparison of the amounts expected to be
received by the creditors under the
Rehabilitation Plan with those that they will
receive if liquidation ensues within the next one
hundred twenty (120) days;
(c) contain information sufficient to give the
various classes of creditors a reasonable basis
for determining whether supporting the Plan is
in their financial interest when compared to the
immediate liquidation of the debtor, including
any reduction of principal interest and penalties
payable to the creditors;
(d) establish classes of voting creditors;
(e) establish subclasses of voting creditors if
prior approval has been granted by the court;
(f) indicate how the insolvent debtor will be
rehabilitated including, but not limited to, debt
forgiveness, debt rescheduling, reorganization
or quasi-reorganization. dacion en pago, debt-
equity conversion and sale of the business (or
parts of it) as a going concern, or setting-up of
a new business entity or other similar
arrangements as may be necessary to restore
the financial well-being and visibility of the
insolvent debtor;
(g) specify the treatment of each class or
subclass described in subsections (d) and (e);
(h) provide for equal treatment of all claims
within the same class or subclass, unless a
particular creditor voluntarily agrees to less
favorable treatment;
(i) ensure that the payments made under the
plan follow the priority established under the
provisions of the Civil Code on concurrence and
preference of credits and other applicable laws;
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(j) maintain the security interest of secured
creditors and preserve the liquidation value of
the security unless such has been waived or
modified voluntarily;
(k) disclose all payments to creditors for pre-
commencement debts made during the
proceedings and the justifications thereof;
(1) describe the disputed claims and the
provisioning of funds to account for appropriate
payments should the claim be ruled valid or its
amount adjusted;
(m) identify the debtor's role in the
implementation of the Plan;
(n) state any rehabilitation covenants of the
debtor, the breach of which shall be considered
a material breach of the Plan;
(o) identify those responsible for the future
management of the debtor and the supervision
and implementation of the Plan, their affiliation
with the debtor and their remuneration;
(p) address the treatment of claims arising after
the confirmation of the Rehabilitation Plan;
(q) require the debtor and its counter-parties to
adhere to the terms of all contracts that the
debtor has chosen to confirm;
(r) arrange for the payment of all outstanding
administrative expenses as a condition to the
Plan's approval unless such condition has been
waived in writing by the creditors concerned;
(s) arrange for the payment" of all outstanding
taxes and assessments, or an adjusted amount
pursuant to a compromise settlement with the
BlR Or other applicable tax authorities;
(t) include a certified copy of a certificate of tax
clearance or evidence of a compromise
settlement with the BIR;
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(u) include a valid and binding r(,solution of a
meeting of the debtor's stockholders to increase
the shares by the required amount in cases
where the Plan contemplates an additional
issuance of shares by the debtor;
(v) state the compensation and status, if any, of
the rehabilitation receiver after the approval of
the Plan; and
(w) contain provisions for conciliation and/or
mediation as a prerequisite to court assistance
or intervention in the event of any disagreement
in the interpretation or implementation of the
Rehabilitation Plan.
Insolvency – This is not presumed in the point
of view of the debtor. Determination of
insolvency is a court function. A debtor shall
have to file a petition first with the court, and the
court shall be the one which shall declare the
insolvency of the debtor. It is determined after
hearing and after the rehabilitation receiver
submitted his report. A debtor is either insolvent
or not, and if so declared, a debtor shall either
be up for rehabilitation or liquidation.
It is the primary consideration for a petition for
rehabilitation to prosper. Whether involuntary or
voluntary proceedings, it is the main goal of the
petitioner: to declare the debtor insolvent.
Because if it is not found to be insolvent, then
the court may, in its discretion, order the
petitioner to pay damages to any creditor or to
the debtor, as the case may be, who may have
been injured by the filing of the petition, to the
extent of any such injury.
Here are the grounds for the petition for
involuntary rehabilitation: 1) the debtor has
failed generally to meet its liabilities as they fall
due; or, 2) there is a prior foreclosure
proceedings initiated, other than by the
petitioners, against the debtor that will prevent
the latter from paying its debts as they become
due.
Sections 31–41 is about the rehabilitation
receiver. Generally, the power of the
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rehabilitation receiver is like a trustee but it
cannot directly manage the business of the
debtor unless such assumption is directed by
the court.
Sections 42-43 talks about Creditors’
Committee.
Assets can only be disposed of on the ordinary
course of business of the debtor. Outside of it,
the rehabilitation receiver must seek the
approval of the court first. It applies to
encumbered properties whether of the debtor or
held by the debtor.
THE REHABILITATION PROCEEDING –
COURT-SUPERVISED REHABILITATION
(PETITION FOR REHABILITATION)
1.) It starts with the filing of either a Petition to
Initiate Voluntary Rehabilitation Proceedings or
Involuntary Rehabilitation Proceedings. It’s only
purpose is to determine if the petition is
sufficient in form (meaning it complies with the
required allegations and/or attachments under
Sec. 12-14) and substance (meaning the
grounds relied upon and the feasibility of the
rehabilitation plan) for the issuance of the
Commencement Order;
3.) Publication and Service of Commencement
Order
4.) Filing of Notice of Claim in accordance with
the Commencement Order (specifying directory
periods) which must be done before the initial
hearing (40 days from the petition or
amendment, if any);
5.) Initial Hearing which determines the list of
creditors who timely filed their notice of claims,
hears any objection to the appointment of the
rehabilitation receiver, directs the creditors to
submit a comment on the Rehabilitation Plan,
and directs the rehabilitation receiver to
evaluate an submit a report about the financial
condition of the debtor;
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Prof. Minda Gapuz
Failure to timely file a claim renders a creditor
barred from participation in the hearing and any
subsequent proceeding. Even if one belatedly
filed, they shall only be entitled to receive the
distributions which will arise from the
rehabilitation proceeding.
6.) Report of Rehabilitation Receiver. It is
independent of any comment from creditors.
The purpose of which is to state the receiver’s
findings and recommendations. The receiver
may report that the debtor is insolvent, the
feasibility of the Rehabilitation plan, substantial
likelihood for the debtor to be successfully
rehabilitated, his recommendation of the
dismissal of the petition, and whether the debtor
should be dissolved and/or liquidated.
Basis whether Rehabilitation Plan is feasible,
or if not, there is a substantial likelihood for
the debtor to be successfully rehabilitated:
a) there are sufficient assets with/which to
rehabilitate the debtor; b) there is sufficient
cash flow to maintain the operations of the
debtor; c) the debtor's, partners, stockholders,
directors and officers have been acting in good
faith and which due diligence; d) the petition is
not s sham filing intended only to delay the
enforcement of the rights of the creditor's or of
any group of creditors; and, e) the debtor would
likely be able to pursue a viable Rehabilitation
Plan.
7.) Give Due Course to the Petition: if the
debtor is insolvent, AND the rehabilitation plan
is feasible, or if not, there is a substantial
likelihood for the debtor to be successfully
rehabilitated; Convert it into a Liquidation
Proceeding: the debtor is insolvent, AND the
rehabilitation plan IS NOT FEASIBLE, AND
THERE IS NO SUBSTANTIAL LIKELIHOOD
OF SUCCESSFUL REHABILITATION;
OR
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Dismiss the Petition: if debtor IS NOT
INSOLVENT, or the petition is a sham intended
to delay enforcement of creditors’ rights, or the
Rehabilitation Plan is materially false, or the
debtor is acted with misrepresentation or in
fraud of creditors;
8.) If Given Due Course: the court shall direct
the rehabilitation receiver to review, revise
and/or recommend action on the Rehabilitation
Plan and submit the same or a new one to the
court within a period of not more than ninety (90)
days.
The court may refer any dispute relating to the
Rehabilitation Plan or the rehabilitation
proceedings pending before it to arbitration or
other modes of dispute resolution, as provided
for under Republic Act No. 9285, Or the
Alternative Dispute Resolution Act of 2004,
should it determine that such mode will resolve
the dispute more quickly, fairly and efficiently
than the court.
If not so referred, it shall schedule a conference
with the debtor and all classes of creditors, and
may consider their views and proposals ill the
review, revision or preparation of the new
Rehabilitation Plan, if any.
9.) Rehabilitation Receiver shall notify creditors
and schedule an election for the approval of
Rehabilitation Plan.
If approved, it shall be submitted to the court for
confirmation
In case of disapproval, it may be “vetoed” by the
court if:
(a)The Rehabilitation Plan complies with the
requirements specified in this Act.
(b) The rehabilitation receiver recommends the
confirmation of the Rehabilitation Plan;
Arellano University School of Law
Donada corner Menlo Street
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Based on the Course Outline prepared by:
Prof. Minda Gapuz
(c) The shareholders, owners or partners of the
juridical debtor lose at least their controlling
interest as a result of the Rehabilitation Plan;
and
(d) The Rehabilitation Plan would likely provide
the objecting class of creditors with
compensation which has a net present value
greater than that which they would have
received if the debtor were under liquidation.
In any case, objections upon the confirmation
may be filed to the court for appropriate hearing.
10.) Confirmation of Rehabilitation Plan by the
court upon issuance of an order of the same.
If no Rehabilitation Plan is confirmed within the
required period, the proceedings may upon
motion or motu propio, be converted into one
for the liquidation of the debtor.
Upon confirmation of the Rehabilitation Plan,
the rehabilitation receiver shall provide a final
report and accounting to the court. Unless the
Rehabilitation Plan specifically requires and
describes the role of the rehabilitation receiver
after the approval of the Rehabilitation Plan, the
court shall discharge the rehabilitation receiver
of his duties.
11.) Termination of Proceedings upon motion
by any stakeholder or the rehabilitation receiver
through a court order either declaring a
successful implementation of the Rehabilitation
Plan or a failure of rehabilitation.
There is failure of rehabilitation in the
following cases: (a) Dismissal of the petition by
the court; (b) The debtor fails to submit a
Rehabilitation Plan; (c) Under the Rehabilitation
Plan submitted by the debtor, there is no
substantial likelihood that the debtor can be
rehabilitated within a reasonable period; (d) The
Rehabilitation Plan or its amendment is
approved by the court but in the implementation
thereof, the debtor fails to perform its
obligations thereunder or there is a failure to
realize the objectives, targets or goals set forth
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Ktrl+ Commercial Law Review I Based on the Course Outline prepared by:
Academic Year 2018-2019 Prof. Minda Gapuz

therein, including the timelines and conditions

for the settlement of the obligations due to the
creditors and other claimants; (e) The
commission of fraud in securing the approval of
the Rehabilitation Plan or its amendment; and,
(f) Other analogous circumstances as may be
defined by the rules of procedure.
As you can see, all around the discussion,
some of the above circumstances have been
already mentioned. Well, what I am trying to say
is that, all of them are collectively called “failure
of rehabilitation”.
Upon a breach of, or upon a failure of the
Rehabilitation Plan the court, upon motion by
an affected party may:
(1) Issue an order directing that the breach be
cured within a specified period of time, falling
which the proceedings may be converted to
liquidation; (2) Issue an order converting the
proceedings to liquidation; (3) Allow the debtor
or rehabilitation receiver to submit amendments
to the Rehabilitation Plan, the approval of which
shall be governed by the same requirements for
the approval of a Rehabilitation Plan under this
subchapter; (4) Issue any other order to remedy
the breach consistent with the present
regulation, other applicable law and the best
interests of the creditors; or, (5) Enforce the
applicable provisions of the Rehabilitation Plan
through a writ of execution.
Liquidation – is a proceeding separate from
the rehabilitation proceedings. Here, we do not
talk about rehabilitation anymore because this
means that the debtor cannot recover from their
situation anymore, thus it calls for liquidation.
Corollary, a petition for rehabilitation does not
pray for liquidation but only for declaration of
insolvency. A petition for liquidation is a
different proceeding and it is not precluded by
the filing of petition for rehablition. In fact, the
debtor can initiate to convert the rehabilitation
proceeding into a liquidation proceeding by
appropriate motion. It seeks to dissolve and
terminate the debtor’s corporate existence.
Liquidation is common to pre negotiated
rehabilitation and court supervised
rehabilitation, they can be converted to
liquidation. However, there is no such thing in
out of court rehabilitation. They may liquidate
themselves pero syempre kng mag pa court
liquidation, file k petition.

Termination of the proceedings shall result in

the following:

(a) The discharge of the rehabilitation receiver

subject to his submission of a final accounting;
and, (b) The lifting of the Stay Order and any
other court order holding in abeyance any
action for the enforcement of a claim against the
debtor; Provided, however, that if the
termination of proceedings is due to failure of
rehabilitation or dismissal of the petition for
reasons other than technical grounds, the
proceedings shall be immediately converted to
liquidation.
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FOREIGN INVESTMENT
Pertinent Constitutional Provisions
(NEGATIVE LIST)
ARTICLE XII - National Economy and
Patrimony
SECTION 1. xx xx xx The State shall promote
industrialization and full employment xx xxx
xx which are competitive in both domestic
and foreign markets. However, the State
shall protect Filipino enterprises against
unfair foreign competition and trade
practices xx xx xx
SECTION 2. xx xx xx The exploration,
development, and utilization of natural
resources shall be under the full control and
supervision of the State. The State may
directly undertake such activities or it may
enter into co-production, joint venture, or
production-sharing agreements with Filipino
citizens, or corporations or associations at
least 60% of whose capital is owned by such
citizens. Such agreements may be for a
period not exceeding twenty-five years,
renewable for not more than twenty-five
years, and under such terms and conditions as
may be provided by law. In cases of water
rights for irrigation, water supply, fisheries,
or industrial uses other than the
development of water power, beneficial use
may be the measure and limit of the grant.
The State shall protect the nation’s marine
wealth in its archipelagic waters, territorial sea,
and exclusive economic zone, and reserve its
use and enjoyment exclusively to Filipino
citizens.
The Congress may, by law, allow small-scale
utilization of natural resources by Filipino
citizens, as well as cooperative fish farming,
with priority to subsistence fishermen and
fishworkers in rivers, lakes, bays, and lagoons.
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Exploration, development, and utilization of
natural resources are within the negative list.
Corporations can only engage in such activities
if it was contracted upon by the State either in a
co-production, joint venture, or production-
sharing agreements. It shall be a for a period of
25 years renewable one time strictly for the
same period. Use and enjoyment of marine
resources are exclusive to Filipinos but water
supply is allowed but for its beneficial use only.
The President may enter into agreements
with foreign-owned corporations involving
either technical or financial assistance for
large-scale exploration, development, and
utilization of minerals, petroleum, and other
mineral oils xx xx xx. In such agreements, the
State shall promote the development and use
of local scientific and technical resources.
The President shall notify the Congress of
every contract entered into in accordance
with this provision, within thirty days from its
execution.
Foreign-owned corporations (meaning 100% or
at least 41% owned by foreigners) may engage
in large-scale exploration, development, and
utilization of minerals, petroleum, and other
mineral oils with the State through the President.
SECTION 3. xx xx xx Alienable lands of the
public domain shall be limited to agricultural
lands. Private corporations or associations
may not hold such alienable lands of the
public domain except by lease, for a period
not exceeding twenty-five years, renewable
for not more than twenty-five years, and not
to exceed 1,000 hectares in area. Citizens of
the Philippines may lease not more than 500
hectares, or acquire not more than 12
hectares thereof by purchase, homestead, or
grant xx xx xx
SECTION 7. Save in cases of hereditary
succession, no private lands shall be
transferred or conveyed except to
individuals, corporations, or associations
Ktrl+ Commercial Law Review I Based on the Course Outline prepared by:
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qualified to acquire or hold lands of the

public domain.
SECTION 8. Notwithstanding the provisions of
Section 7 of this Article, a natural-born citizen
of the Philippines who has lost his
Philippine citizenship may be a transferee of
private lands, subject to limitations provided by
law.
Public utilities are also in the negative list. This
for a one time period of 50 years. It further
requires that the managers and officers of the
corporation must be Filipinos.
SECTION 14. The practice of all professions
in the Philippines shall be limited to Filipino
citizens, save in cases prescribed by law.

SECTION 10. The Congress shall, upon
recommendation of the economic and planning
agency, when the national interest dictates,
reserve to citizens of the Philippines or to
corporations or associations at least 60% of
whose capital is owned by such citizens, or
such higher percentage as Congress may
prescribe, certain areas of investments xx xx
xx
In the grant of rights, privileges, and
concessions covering the national economy
and patrimony, the State shall give
preference to qualified Filipinos.
The State shall regulate and exercise
authority over foreign investments within its
national jurisdiction and in accordance with
its national goals and priorities.
SECTION 17. In times of national emergency,
when the public interest so requires, the
State may, during the emergency and under
reasonable terms prescribed by it, temporarily
take over or direct the operation of any
privately owned public utility or business
affected with public interest.
SECTION 18. The State may, in the interest of
national welfare or defense, establish and
operate vital industries and, upon payment of
just compensation, transfer to public
ownership utilities and other private
enterprises to be operated by the
Government. (EMINENT DOMAIN ON
BUSINESS OWNERSHIP)

This is the mandate of the creation of Foreign

Investment Act

SECTION 11. No franchise, certificate, or any

other form of authorization for the operation of
a public utility shall be granted except to
citizens of the Philippines or to corporations
or associations organized under the laws of
the Philippines at least 60% of whose capital
is owned by such citizens, nor shall such
franchise, certificate, or authorization be
exclusive in character or for a longer period
than fifty years xx xx xx The participation of
foreign investors in the governing body of any
public utility enterprise shall be limited to their
proportionate share in its capital, and all the
executive and managing officers of such
corporation or association must be citizens
of the Philippines.
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Ktrl+ Commercial Law Review I
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FIA Negative List (Foreign Investments Act
of 1991 and other related laws plus the
Constitution)
The term "Foreign Investments Negative List"
or "Negative List" shall mean a list of areas of
economic activity whose foreign ownership is
limited to a maximum of forty percent (40%) of
the equity capital of the enterprise engaged
therein
As a general rule, there are no restrictions on
extent of foreign ownership of export
enterprises. In domestic market enterprises,
foreigners can invest as much as one hundred
percent (100%) equity except in areas
included in the negative list.
Export Businesses - An export enterprise is
defined as a business who exports at least 60%
of its output.
Export Business Enterprises may be 100% fully
foreign owned and may file with the SEC for an
exemption of the paid-up capital requirement of
USD 200,000.00.
KPO, BPO, Back Office, IT, Web Development
and call centers are all considered Philippines
Export Enterprises.
Foreign Investments in Domestic Market
Enterprises. - Non-Philippine nationals may
own up to one hundred percent (100%) of
domestic market enterprises unless foreign
ownership therein is prohibited or limited by
existing law or the Foreign Investment Negative
List under Section 8 hereof.
A domestic market enterprise may change its
status to export enterprise if over a three (3)
year period it consistently exports in each year
thereof sixty per cent (60%) or more of its output.
The 5 investment areas and activities that can
now be 100% owned by foreigners are the
Arellano University School of Law
Donada corner Menlo Street
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Based on the Course Outline prepared by:
Prof. Minda Gapuz
following, according to the National Economic
and Development Authority (NEDA):
Internet businesses;
Teaching at higher education levels provided
the subject being taught is not a professional
subject;
Training centers that are engaged in short-
term high level skills development that do not
form part of the formal education system;
Adjustment companies, lending companies,
financing companies, and investment houses;
Wellness centers
LIST A: FOREIGN OWNERSHIP IS LIMITED
BY MANDATE OF THE CONSTITUTION AND
SPECIFIC LAWS
No Foreign Equity (0%)
1. Mass Media except recording (Art. XVI,
Sec.11 of the Constitution; Presidential
Memorandum dated 04 May 1994)
2. Practice of all professions *1 (Art. XII,
Sec.14 of the Constitution, Sec. 1 of R.A. 5181,
Sec. 7. J of R.A. 8981)
The following are expressly disallowed by law
for practice by foreigners
a. Pharmacy (R.A. 5921)
b. Radiologic and x-ray technology (R.A. 7431)
c. Criminology (R.A. 6560)
d. Forestry (R.A. 6239)
e. Law (Art. VIII, Section 5 of the Constitution;
Rule 138, Sec. 2 of the Rules of the Court of the
Philippines
Foreigners are allowed to practice the following
professions provided their country allows
Filipinos to be admitted to the practice of these
professions: ENGINEERING ARCHITECTURE
related profession, MEDICINE related
profession, accountancy, architecture,
chemistry, customs brokerage, environmental
planning, geology, landscape architecture,
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librarianship, marine deck officers, marine
engine officers, master plumbing, sugar
technology, social work, teaching, agriculture,
fisheries, guidance counseling, REAL ESTATE
SERVICE related profession, respiratory
therapy, psychology, real estate service, and
interior design allow corporate practice by
Filipinos.
3. Retail trade enterprises with paid-up
capital of less than US$2,500,000 (Sec. 5 of
R.A. 8762)
Full foreign participation is allowed for retail
trade enterprises: (a) with paid-up capital of
US$2,500,000 or more provided that
investments for establishing a store is not
less than US$830,000; or (b) specializing in
high end or luxury products, provided that
the paid-up capital per store is not less than
US$250,000 (Sec. 5 of R.A. 8762).
4. Cooperative (Ch. III, Art. 26 of R.A. 6938)
5. Private security agencies (SEC. 4 of R.A.
5487)
6. Small-scale mining (Sec. 3 of R.A. 5487)
7. Utilization of marine resources in
archipelagic waters, territorial sea, and
exclusive economic zone as well as small-
scale utilization of natural resources in
rivers, lakes, bays, and lagoons (Art. XII, Sec.
2 of the Constitution)
EXCEPT DEEP SEA COMMERCIAL FISHING
8. Ownership, operation and management of
cockpits (Sec. 5 of P.D. 449)
9. Manufacture, repair, stockpiling and/or
distribution of nuclear weapons (Art. II, Sec.
8 of the Constitution)
10. Manufacture, repair, stockpiling and/or
distribution of biological, chemical and
radiological weapons and anti-personal
mines (various treaties to which the Philippines
Arellano University School of Law
Donada corner Menlo Street
Pasay City
Based on the Course Outline prepared by:
Prof. Minda Gapuz
is a signatory and conventions supported by the
Philippines)
Domestic Investments for distribution of
weapons of destruction are also prohibited (Art.
II, Sec. 8 of the Constitution;
Conventions/Treaties to which the Philippines
is a signatory).
11. Manufacture of firecrackers and other
pyrotechnic devices (Sec. 5 of R.A. 7183)
Up to Twenty Percent (20%) Foreign Equity
12. Private radio communications network
(R.A. 3846)
Up to Twenty –Five Percent (25%) Foreign
Equity
13. Private recruitment, whether for local or
overseas employment (Art. 27 of P.D. 442)
14. Contracts for the construction and repair
of locally-funded public works (Sec. 1 of
Commonwealth Act No. 541, Letter of
Instruction No. 630) except:
a. Infrastructure/development projects covered
in R.A. 7718 (Sec. 2); and,
b. Projects which are foreign funded or
assisted and required to undergo
international competitive bidding (Sec. 2(a)
of R.A. 7718)
15. Contracts for the construction of defense
related structures (Sec. 1 of CA 541)
Up to Thirty Percent (30%) Foreign Equity
16. Advertising (Art. XVI, Sec. 11 of the
Constitution)
Up to Forty Percent (40%) Foreign Equity
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Lending companies regulated by SEC are
allowed to have up to 49% foreign equity
participation (Sec. 6 of R.A. 9474). Financing
companies and investment houses regulated
by SEC are allowed to have up to 60% foreign
equity participation (Sec. 6 of R.A. 5980 as
amended by R.A. 8556; P.D. 129 as amended
by R.A. 8366).
17. Exploration, development and utilization
of natural resources (Art. XII, Sec. 2 of the
Constitution)
Full foreign participation is allowed through
financial or technical assistance agreement
with the President (Art. XII, Sec. 2 of the
Constitution)
18. Ownership of private lands (Art. XII, Sec.
7 of the Constitution; Ch. 5, Sec. 22 of CA 141;
Sec. 4 of R.A. 9182)
A corporation held by 60% Filipino is qualified
to own lands of public domain (alienable lands,
agricultural lands).
19. Operation of public utilities (Art. XII, Sec.
11 of the Constitution; Sec. 16 of CA 146)
The participation of foreign investors in the
governing body of any public utility enterprise
shall be limited to their proportionate share in its
capital, and all the executive and managing
officers of such corporation or association be
citizens of the Philippines (Article XII, Section
11 of the Constitution).
A “public utility” is a business or service
engaged in regularly supplying the public
with some commodity or service of
consequence such as electricity, gas, water,
transportation, telephone or telegraph
service (Supreme Court ruling JG Summit
Holdings vs. Court of Appeals, et al.,
September 24, 2003). Power generation and
the supply of electricity to the contestable
market are not considered as public utility
operation (Sec. 6 and Sec. 29, respectively of
R.A. 9136).
Arellano University School of Law
Donada corner Menlo Street
Pasay City
Based on the Course Outline prepared by:
Prof. Minda Gapuz
20. Educational institutions other than those
established by religious groups and
mission boards (Art. XIV, Sec. 4 of the
Constitution)
Control and administration of educational
institutions shall be vested in citizens of the
Philippines (Art. XIV, Sec. 4(2) of the
Constitution).
Teaching at higher education levels provided
the subject being taught is not a professional
subject are now allowed 100% foreign;
Training centers that are engaged in short-term
high level skills development that do not form
part of the formal education system are now
allowed 100% foreign;
21. Culture, production, milling, processing,
trading excepting retailing, of rice and corn
and acquiring, by barter, purchase or otherwise,
rice and corn and the by-products thereof (Sec.
5 of P.D. 194)
Full foreign participation is allowed provided
that within the 30-year period from start of
operation, the foreign investor shall divest a
minimum of 60 percent of their equity to
Filipino citizens (Sec. 5 of P.D. 194; NFA
Council Resolution No. 193 s. 1998).
22. Contracts for the supply of materials,
goods and commodities to government-
owned or controlled corporation, company,
agency or municipal corporation (Sec. 1 of
R.A. 5183)
23. Facility operator of an infrastructure or a
development facility requiring a public
utility franchise (Art. XII, sec. 11 for the
Constitution; Sec. 2 (a) of R.A. 7718)
24. Operation of deep sea commercial
fishing vessels (Sec. 27 of R.A. 8550)
25. Adjustment Companies (Sec. 332 of R.A.
10607 amending P.A. 612)
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Adjustment companies, lending companies,
financing companies, and investment houses
are now allowed 100% foreign
26. Ownership of condominium units (Sec. 5
of R.A. 4726)
LIST B: FOREIGN OWNERSHIP IS LIMITED
FOR REASONS OF SECURITY, DEFENSE,
RISK TO HEALTH AND MORALS AND
PROTECTION OF SMALL AND MEDIUM-
SCALE ENTERPRISES
Up to Forty Percent (40%) Foreign Equity
1. Manufacture, repair, storage, and/or
distribution of products and/or ingredients
requiring Philippine National Police (PNP)
clearance:
a. Firearms (handguns to shotguns), parts of
firearms and ammunition therefore,
instruments or implements used or
intended to be used in the manufacture of
firearms
b. Gunpowder
c. Dynamite
d. Blasting Supplies
e. Ingredients used in making explosives
i. Chlorates of potassium and sodium; ii.
Nitrates of ammonium, potassium, sodium
barium, copper (11), lead (11), calcium and
cuprite; iii. Nitric acid; iv. Nitrocellulose; v.
Perchlorates of ammonium, potassium and
sodium; vi. Dinitrocellulose; vii. Glycerol; viii.
Amorphous phosphorus; ix. Hydrogen peroxide
(see designated survivor); x. Strontium nitrate
powder; xi. Toluene
f. Telescopic sights, sniper scope and other
similar devices
However, the manufacture or repair of these
items may be authorized by the Chief of the
PNP to non-Philippine nationals (at least 41%
foreign); Provided that a substantial
Arellano University School of Law
Donada corner Menlo Street
Pasay City
Based on the Course Outline prepared by:
Prof. Minda Gapuz
percentage of output, as determined by the
said agency, is exported. Provided further that
the extent of foreign equity ownership
allowed shall be specified in the said
authority/clearance (R.A. 7042 as amended
by R.A. 8179).
2. Manufacture, repair, storage and/or
distribution of products requiring
Department of National Defense (DND)
clearance:
a. Guns and ammunition for warfare; b. Military
ordnance and parts thereof (e.g., torpedoes,
depth charges, bombs, grenades, missiles); c.
Gunnery, bombing and fire control systems and
components; d. Guided missiles/missile
systems and components; e. Tactical aircraft
(fixed and rotary-winged0, parts and
components thereof); f. Space vehicles and
component systems; g. Combat vessels (air,
land and naval) and auxiliaries; h. Weapons
repair and maintenance equipment; i. Military
communications equipment; j. Night vision
equipment; k. Simulated coherent radiation
devices, components and accessories; i.
Armament training devices; m. Others as may
be determined by the Secretary of the DND
However, the manufacture or repair of these
items may be authorized by the Secretary of
National Defense to non-Philippine national;
Provided further that the extent of foreign equity
ownership allowed shall be specified in the said
authority/clearance (R.A. 7042 as amended by
R.A. 8179).
3. Manufacture and distribution of
dangerous drugs (R.A. 7042 as amended by
R.A. 8179)
4. Sauna and steam bathhouses, massage
clinics and other like activities regulated by
law because of risks posed to public health
and morals (R.A. 7042 as amended by R. A.
8179)
Wellness centers are now allowed 100%
foreign
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5. All forms of gambling (R.A. 7042 as
amended by R.A. 8179) except those covered
by investment agreements with PAGCOR
(P.D. 1869 as amended by R.A. 9487)
6. Small and medium-sized Domestic market
enterprises with paid-in equity capital at
least in the equivalent of US$200,000 (R.A.
7042 as amended by R.A. 8179)
7. Domestic market enterprises which
involve advanced technology or employ at
least fifty (50) direct employees with paid-in
equity capital at least in the equivalent of
US$100,000 (R.A. 7042 as amended by R.A.
8179)
IMPORTANT MATTERS:
A "Philippine national" is a Filipino Citizen. It is
also a domestic partnership, association, or
corporation registered in the Philippines and
“Filipino owned”. A Filipino owned company is
one which 60% of its outstanding capital stock
entitled to vote, or a trustee of funds 60% of
which, is held by Filipinos and at least 60% of
its Board of Directors are Filipinos.
"Doing business" generally means performance
of acts implying continuity of commercial
dealings or arrangements, and contemplate to
that extent the performance of acts or works, or
the exercise of some of the functions normally
incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of
the business organization. The term includes:
1) Soliciting orders, service contracts, opening
offices, whether called "liaison" offices or
branches;
2) Appointing representatives or distributors
domiciled in the Philippines, or although not
domiciled, nonetheless stayed within the
Philippines for a period of 180 days or more;
3) Participating in the management, supervision
or control of any domestic business, firm, entity
or corporation in the Philippines;
Arellano University School of Law
Donada corner Menlo Street
Pasay City
Based on the Course Outline prepared by:
Prof. Minda Gapuz
However, the phrase "doing business” shall not
include:
a) Mere investment, as a shareholder, in
domestic corporations;
b) Exercise of investor’s rights;
c) Nomination of officer to represent its interests;
d) Appointment of representative or distributor
which transacts business in its own name and
for its own account.
“Export enterprise" means an enterprise
wherein a manufacturer, processor or service
[including tourism] enterprise exports sixty
percent (60%) or more of its output, or wherein
a trader purchases products domestically and
exports sixty per cent (60%) or more of such
purchases
“Domestic market enterprise" shall mean an
enterprise which produces goods for sale, or
renders services to the domestic market
entirely or if exporting a portion of its output fails
to consistency export at least sixty percent
(60%) thereof.
"Foreign Investments Negative List" or
"Negative List" shall mean a list of areas of
economic activity whose foreign ownership is
limited to a maximum of forty percent (40%) of
the equity capital of the enterprise engaged
therein.
Former natural born citizens of the Philippines
shall have the same investment rights of a
Philippine citizen in Cooperatives, Rural Banks,
Thrift Banks and Private Development Banks,
and Financing Companies.
Said Investment rights shall not extend to
activities reserved by the Constitution, including
[1] the exercise of profession: [2] in defense-
related activities, unless specifically authorized
by the Secretary of National Defense: and, [3]
activities covered by the Retail Trade Act,
Security Agency Act, Small Scale Mining Act,
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Ktrl+ Commercial Law Review I Based on the Course Outline prepared by:
Academic Year 2018-2019 Prof. Minda Gapuz

Rice and Corn Industry Act, and Cockpits must be citizens of the Philippines, in order that
Operation and Management. the corporation, shall be considered a
"Philippine national."
Any natural-born citizen who has lost his
Philippine citizenship and who has the legal
capacity to enter into a contract under
Philippine laws may be a transferee of a private
land up to a maximum area of 5,000 sq. m. of
urban land, or 3 hectares of rural land, at the
maximum of 2 lots. A transferee who has
already acquired urban land shall be
disqualified from acquiring rural land and vice
versa.

For married individuals, such privilege can be

availed by one or both spouses with a total area
of lot not exceeding the maximum area fixed.

If the transferee already owned a land, he shall

still be entitled to an additional land in the same
area at the maximum limit, with the maximum.

The term "Philippine national" shall mean a

citizen of the Philippines; of a domestic
partnership or association wholly owned by
citizens of the Philippines; or a corporation
organized under the laws of the Philippines of
which at least sixty percent (60%) of the capital
stock outstanding and entitled to vote is owned
and held by citizens of the Philippines; or a
corporation organized abroad and registered as
doing business in the Philippines under the
Corporation Code of which one hundred
percent (100%) of the capital stock outstanding
and entitled to vote is wholly owned by Filipinos
or a trustee of funds for pension or other
employee retirement or separation benefits,
where the trustee is a Philippine national and at
least sixty percent (60%) of the fund will accrue
to the benefit of Philippine nationals: Provided,
That where a corporation and its non-Filipino
stockholders own stocks in a Securities and
Exchange Commission (SEC) registered
enterprise, at least sixty percent (60%) of the
capital stock outstanding and entitled to vote of
each of both corporations must be owned and
held by citizens of the Philippines and at least
sixty percent (60%) of the members of the
Board of Directors of each of both corporations
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Donada corner Menlo Street
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Ktrl+ Commercial Law Review I
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SECURITIES REGULATIONS CODE
TENDER OFFER
T.O. is a public announcement of one’s
intention to acquire equity security of a public
company. It is essentially an offer to
stockholders of a public company, telling the
latter the terms of the offer. It gives
shareholders, specifically the minority, to the
opportunity to sell their shares at the same or
near at the same price as those of the majority.
It means a publicly announced intention by a
person acting alone or in concert with other
persons (hereinafter referred to as "person") to
acquire outstanding equity securities of a
public company, or outstanding equity
securities of an associate or related company
of such public company which controls the
said public company.
HOW TO TENDER OFFER
1) File a Tender Offer Form (SEC Form 19-1)
with the SEC, attach exhibits;
2) Copy furnish, personally, the tender offer
form and attached exhibits to the target
company and to each Exchange where the
company’s securities is listed (THIS SIGNIFIES
THE COMMENCEMENT DATE);
2a) Disclosure Requirements in Tender Offers
The Offeror shall publish, send or give to
security holders in the manner prescribed by
SRC Rule 19.9, a report containing the
following information:
 The identity of the Offeror including his
or its present principal occupation or
business;
 The identity of the target company;
 The amount of class of securities being
sought and the type and amount of
consideration being offered;
 The scheduled expiration date of the
tender offer, whether the tender offer
Arellano University School of Law
Donada corner Menlo Street
Pasay City
Based on the Course Outline prepared by:
Prof. Minda Gapuz
may be extended and, if so, the
procedures for extension of the tender
offer;
 The exact dates when security holders
who deposit their securities shall have
the right to withdraw their securities
pursuant to this Rule and the manner
by which shares will be accepted for
payment and which withdrawal may be
effected;
 If the tender offer is for less than all of
the securities of the class and the
Offeror is not obligated to purchase all
securities tendered, the exact date of
the period during which securities will
be accepted on a pro rata basis under
this Rule and the present intention or
plan of the Offeror with respect to the
tender offer in the event of an
oversubscription by security holders;
 The confirmation by the Offeror's
financial adviser or another appropriate
third party that the resources available
to the Offeror are sufficient to satisfy full
acceptance of the offer; and,
 The information required in SEC Form
19-1.
If any material change occurs in the information
previously disclosed to security holders, the
Offeror shall disclose promptly such change in
the manner prescribed by this Rule.
No tender offer shall be made unless: It is open
to all security holders of the class of securities
subject to the tender offer; and, the amount of
consideration paid to any security holder
pursuant to the tender offer shall be the
highest consideration paid to any other
security holder during such tender offer.
Offer price must be the highest price paid by
him for such securities within 6 months prior the
commencement date.
The Offeror shall not extend the period of a
tender offer without prior clearance from the
Commission and without issuing a notice of
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Ktrl+ Commercial Law Review I
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such extension by publication in a national
newspaper of general circulation. The notice
shall include a disclosure of the number of
securities deposited to date and shall be made
public not later than the scheduled original
expiration date of the offer.
2b) Dissemination Requirements
An Offeror or Issuer shall publish the terms and
conditions of the tender offering in two (2)
national newspapers of general circulation in
the Philippines on the date of
commencement of the tender offer and for
two (2) consecutive days after compliance
with the disclosure requirement.
(CONTEMPORANEOUS with the copy
furnishing of tender offer & disclosure)
If a material change occurs in the information
published, sent or given to security holders, the
Offeror shall disseminate promptly a disclosure
of such change in a manner reasonably
calculated to inform security holders of such
change.
2b) Period and Manner of Making Tender
Offers
A tender offer shall, unless withdrawn, remain
open until the expiration of:
i) Within 20-60 business days from
commencement date.
ii) Within 10 business days from notice of
change, or notice of amendment if any, to 60
business days from commencement date.
3) File additional tender offer materials, plus
amendments, if any (again, do number 2);
4) Report the result of tender offer to the
SEC, within 10 days after the termination of the
tender offer, plus filing copies of final
amendments, if any.
IMPORTANT MATTERS
Arellano University School of Law
Donada corner Menlo Street
Pasay City
Based on the Course Outline prepared by:
Prof. Minda Gapuz
"Tender offer materials" mean: (i) the Offeror's
formal offer, including all the material terms
and conditions of the tender offer and all their
amendments; (ii) the related transmittal letter
(whereby equity securities of the target
company that are sought in the tender offer may
be transmitted to the Offeror or its depository)
and all their amendments; and (iii) press
releases, advertisements, letters and other
documents published by the Offeror or sent
or given by the Offeror to security holders which,
directly or indirectly, solicit, invite or request
tenders of the equity securities being sought in
the tender offer.
"Commencement" means the date a tender
offer is first published, sent or given to security
holders.
"Issuer Tender Offer" means a publicly
announced intention by an Issuer to reacquire
any of its own class of equity securities, or by
an associate of such Issuer to acquire such
securities.
"Termination" means the date after which
equity securities may not be tendered pursuant
to the tender offer.
Public company means any corporation with a
class of equity securities listed on an Exchange,
or with assets in excess of PhP 50,000,000.00
and has 200 or more holders each holding at
least 100 shares of a class of its equity
securities.
Exchange is an organized marketplace or
facility that brings together buyers and sellers,
and executes trades of securities and/or
commodities.
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Ktrl+ Commercial Law Review I Based on the Course Outline prepared by:
Academic Year 2018-2019 Prof. Minda Gapuz

Mandatory Tender Offers (SPECIFIC

MANNERS OF MAKING TENDER OFFER per
percentage of acquisition)

1) One who intends to acquire 15% of equity

securities (aggregate) in a public company in
one or more transactions within 12 months
shall file a declaration to that effect with the
Commission;

This means that only Filing of Tender Offer

Form with the SEC is required. The disclosure
shall not be strict, meaning, the offeror shall
only disclose to specific security holder(s) with
which the offer is to be communicated.

2) One who intends to acquire 35% of

outstanding voting shares (sufficient to gain
control of the board of the board) (aggregate)
in a public company in one or more
transactions within 12 months shall disclose
such intention and contemporaneously make a
tender offer within the 12 months;

One who intends to acquire the said 35% shall

not be required to make a tender offer even if
the remainder has been acquired through a
block sale (for example 14% is already acquired
through the Exchange Trading System) if other
offeror already bought the target.

One who intends to acquire the said 35%

DIRECTLY from one or several specific
stockholders shall be required to make a
tender offer to all holders of outstanding
voting shares (this is as opposed to the 15%
rule above).

3) Any acquisition that would result in

ownership of over 50% of the total
outstanding equity securities of a public
company, the acquirer shall be required to
make a tender offer for all the outstanding
equity securities to all remaining
stockholders of the said company (as
opposed to 1 and 2-direct, this time, tender offer
is made to all remaining stockholders).

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Arellano University School of Law

Donada corner Menlo Street
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Ktrl+ Commercial Law Review I Based on the Course Outline prepared by:
Academic Year 2018-2019 Prof. Minda Gapuz

PHILIPPINE ECONOMIC ZONE AUTHORITY
(The Special Economic Zone Act of 1995)
The primary purpose of this law is to provide
incentives to needed investments.
Since non-voting shares may vote on certain
matters, they have the right to dissent on said
matters; thus, they have appraisal rights on said
matters.

Securities

Holders of non-voting shares shall be entitled to SRC

vote on the following matters: (a) amendment
Insiders Trading
on the articles of incorporation; (b) adoption and
amendment of by-laws; (c) disposition of all or Future Commodity Contracts
substantially all of the corporate properties; (c)
creation of or increasing bonded indebtedness; Voting Trust
(d) increase or decrease of capital stock; (e)
Letters of Credit
merger or consolidation; (f) investment of
corporate funds in other corporations or for Trusteeship
purposes other than the primary purpose; (g)
dissolution of the corporation; (h) grant of FRIA
compensation other than reasonable per diems
Corporation Code
to directors.
Mortgage
Appraisal Rights is the right of a stockholder to
dissent from a list of corporate acts and to Rule on Exports in relation to foreign
compel payment of the fair value of his shares Investment, benefits and incentives under the
and thereafter withdraw from the corporation. law

Rules on Former Filipino in acquiring real

property
• List of corporate acts wherein stockholders
may exercise Appraisal Rights

(a) Amendments of Articles of Incorporation

that changes the rights of any stockholder or
class of shares

(b) Amendments of Articles of Incorporation

that authorizes preference over existing class of
shares

(c) Amendments of Articles of Incorporation that

extends or shortens the corporate term

(d) In case of Merger or Consolidation

(e) In case of investment of corporate funds in

other corporation or purpose different from their
primary purpose

(f) In any case with respect to close

corporations when it has sufficient asset.

19

Arellano University School of Law

Donada corner Menlo Street
Pasay City