PRELIM Regulatory Framework and Legal Issues in Business

Regulatory Framework and Legal Issues in Business || Module Content ||Prelim|| Module 1-2
Course Description This course discusses the regulatory business environment in the Philippines
with a focus on heavily regulated industries, the rationale for regulation, and the
institutions performing regulatory functions. It examines several issues in regulation that
Philippine business firms contend with to remain in operation, such as restrictions on
ownership and price control; cost of compliance; ambiguity and varying interpretations of
statutes by regulatory agencies; and conflict between national and local regulations.
Further, this course includes fundamental concepts, principles and rules of government
regulation as they to pertain to business; authority government to regulate business at
the national and local levels, government regulation affects business decision-making and
planning; legislative and regulatory action plans that link business objectives to desired
regulatory outcomes; knowledge of laws concerning business participation in the political
process; ethical considerations related to business influence of government and
regulatory processes; important areas of government regulation of business including
financial regulation, environmental regulation and competitive practices; and potential
regulatory and legal problems and identify when it is appropriate to consult an attorney
or other professional.
Course Learning At the end of the course, students would be able to:
Outcomes
1. Examine the rationales (market failures of one kind or another, a desire
on the part of those regulated to avoid the rigors of the marketplace,
etc.), legal ground rules and regulatory models used in various areas of
regulation. One objective
2. To gain a good understanding of how government intervention has
actually played out in selected markets.
3. Examine markets that, though once regulated, have since been
deregulated.
Evidence of Students can understand on Insolvency Law/Financial Rehabilitation and Insolvency Act
Learning/ (FRIA) of 2010 (RA 10142), Corporate Rehabilitation, Bouncing Checks Law, Securities
Assessment Tools Regulation Code and other topics related to Regulatory Framework.
Module All activities must be written in a separate paper and to be submitted upon the
requirements collection of the offline module schedule. You may also opt to submit your output via
submission email or messenger if you will have the chance to access the internet (please check
instructions
your timeline for guidance).
Topics (Coverage) Topics:
Prelims
Financial Rehabilitation and Insolvency Act (FRIA) of 2010
Security Regulation Code
Target Second Year Students of the Bachelor of Science in Accountancy and Accounting
Participants Information System
Learning Time: 3 hours a week for 18 weeks, 54 total hours.
Means for Learner Allotment of consultation hour once a week, discussion through messenger.
Support
Atty. Florencio Aliman Jr.
Email: florencioalimanjr@gmail.com
Messenger: Jhun Jr Aliman
CARD-MRI Development Institute,Inc. Modular Learning Page 2 of 40

Students must be able to Rubrics/Standards Performance
achieve 85% and above to based
Summative Assessment pursue BSA course. Earning 85% and above Rubrics/
performance would
(Performance/Product) 75% is considered passed and Standards
qualify the student to
would not repeat the course but
BSA program (for the
grade below 85% would
disqualify the student from BSA authentic
program. assessment)

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Regulatory Framework and Legal Issues in Business|| Module Content || Prelim |Module 1-2
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"Financial Rehabilitation and Insolvency Act (FRIA) of 2010".
Now, let’s acquire new knowledge!
REPUBLIC ACT No. 10142
AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF FINANCIALLY DISTRESSED ENTERPRISES AND
INDIVIDUALS
Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:
CHAPTER I GENERAL PROVISIONS
Section 1. Title. - This Act shall be known as the "Financial Rehabilitation and Insolvency Act (FRIA) of 2010".
Section 2. Declaration of Policy. - It is the policy of the State to encourage debtors, both juridical and natural persons,
and their creditors to collectively and realistically resolve and adjust competing claims and property rights. In furtherance
thereof, the State shall ensure a timely, fair, transparent, effective and efficient rehabilitation or liquidation of debtors.
The rehabilitation or liquidation shall be made with a view to ensure or maintain certainly and predictability in commercial
affairs, preserve and maximize the value of the assets of these debtors, recognize creditor rights and respect priority of
claims, and ensure equitable treatment of creditors who are similarly situated. When rehabilitation is not feasible, it is in
the interest of the State to facilities a speedy and orderly liquidation of these debtor's assets and the settlement of their
obligations.
Section 3. Nature of Proceedings. - The proceedings under this Act shall be in rem. Jurisdiction over all persons affected
by the proceedings shall be considered as acquired upon publication of the notice of the commencement of the
proceedings in any newspaper of general circulation in the Philippines in the manner prescribed by the rules of procedure
to be promulgated by the Supreme Court.
The proceedings shall be conducted in a summary and non-adversarial manner consistent with the declared policies of
this Act and in accordance with the rules of procedure that the Supreme Court may promulgate.
Section 4. Definition of Terms. - As used in this Act, the term:
(a) Administrative expenses shall refer to those reasonable and necessary expenses:
(1) incurred or arising from the filing of a petition under the provisions of this Act;
(2) arising from, or in connection with, the conduct of the proceedings under this Act, including those incurred for
the rehabilitation or liquidation of the debtor;
(3) incurred in the ordinary course of business of the debtor after the commencement date;
(4) for the payment of new obligations obtained after the commencement date to finance the rehabilitation of the
debtor;
(5) incurred for the fees of the rehabilitation receiver or liquidator and of the professionals engaged by them; and
(6) that are otherwise authorized or mandated under this Act or such other expenses as may be allowed by the
Supreme Court in its rules.
(b) Affiliate shall refer to a corporation that directly or indirectly, through one or more intermediaries, is controlled by, or
is under the common control of another corporation.

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(c) Claim shall refer to all claims or demands of whatever nature or character against the debtor or its property, whether
for money or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed,
including, but not limited to; (1) all claims of the government, whether national or local, including taxes, tariffs and
customs duties; and (2) claims against directors and officers of the debtor arising from acts done in the discharge of their
functions falling within the scope of their authority: Provided, That, this inclusion does not prohibit the creditors or third
parties from filing cases against the directors and officers acting in their personal capacities.
(d) 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.
(e) Commencement Order shall refer to the order issued by the court under Section 16 of this Act.
(f) Control shall refer to the power of a parent corporation to direct or govern the financial and operating policies of an
enterprise so as to obtain benefits from its activities. Control is presumed to exist when the parent owns, directly or
indirectly through subsidiaries or affiliates, more than one-half (1/2) of the voting power of an enterprise unless, in
exceptional circumstances, it can clearly be demonstrated that such ownership does not constitute control. Control also
exists even when the parent owns one-half (1/2) or less of the voting power of an enterprise when there is power:
(1) over more than one-half (1/2) of the voting rights by virtue of an agreement with investors;
(2) to direct or govern the financial and operating policies of the enterprise under a statute or an agreement;
(3) to appoint or remove the majority of the members of the board of directors or equivalent governing body;
or
(4) to cast the majority votes at meetings of the board of directors or equivalent governing body.
(g) Court shall refer to the court designated by the Supreme Court to hear and determine, at the first instance, the cases
brought under this Act.
(h) Creditor shall refer to a natural or juridical person which has a claim against the debtor that arose on or before the
commencement date.
(i) Date of liquidation shall refer to the date on which the court issues the Liquidation Order.
(j) Days shall refer to calendar days unless otherwise specifically stated in this Act.
(k) Debtor shall refer to, unless specifically excluded by a provision of this Act, a sole proprietorship duly registered with
the Department of Trade and Industry (DTI), a partnership duly registered with the Securities and Exchange Commission
(SEC), a corporation duly organized and existing under Philippine laws, or an individual debtor who has become insolvent
as defined herein.
(l) Encumbered property shall refer to real or personal property of the debtor upon which a lien attaches.
(m) General unsecured creditor shall refer to a creditor whose claim or a portion thereof its neither secured, preferred
nor subordinated under this Act.
(n) Group of debtors shall refer to and can cover only: (1) corporations that are financially related to one another as
parent corporations, subsidiaries or affiliates; (2) partnerships that are owned more than fifty percent (50%) by the same
person; and (3) single proprietorships that are owned by the same person. When the petition covers a group of debtors,
all reference under these rules to debtor shall include and apply to the group of debtors.
(o) Individual debtor shall refer to a natural person who is a resident and citizen of the Philippines that has become
insolvent as defined herein.

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(p) Insolvent shall refer to the financial condition of a debtor that is generally unable to pay its or his liabilities as they fall
due in the ordinary course of business or has liabilities that are greater than its or his assets.
(q) Insolvent debtor's estate shall refer to the estate of the insolvent debtor, which includes all the property and assets
of the debtor as of commencement date, plus the property and assets acquired by the rehabilitation receiver or liquidator
after that date, as well as all other property and assets in which the debtor has an ownership interest, whether or not
these property and assets are in the debtor's possession as of commencement date: Provided, That trust assets and
bailment, and other property and assets of a third party that are in the possession of the debtor as of commencement
date, are excluded therefrom.
(r) Involuntary proceedings shall refer to proceedings initiated by creditors.
(s) Liabilities shall refer to monetary claims against the debtor, including stockholder's advances that have been recorded
in the debtor's audited financial statements as advances for future subscriptions.
(t) Lien shall refer to a statutory or contractual claim or judicial charge on real or personal property that legality entities a
creditor to resort to said property for payment of the claim or debt secured by such lien.
(u) Liquidation shall refer to the proceedings under Chapter V of this Act.
(v) Liquidation Order shall refer to the Order issued by the court under Section 112 of this Act.
(w) Liquidator shall refer to the natural person or juridical entity appointed as such by the court and entrusted with such
powers and duties as set forth in this Act: Provided, That, if the liquidator is a juridical entity, it must designated a natural
person who possesses all the qualifications and none of the disqualifications as its representative, it being understood
that the juridical entity and the representative are solidarity liable for all obligations and responsibilities of the liquidator.
(x) Officer shall refer to a natural person holding a management position described in or contemplated by a juridical
entity's articles of incorporation, bylaws or equivalent documents, except for the corporate secretary, the assistant
corporate secretary and the external auditor.
(y) Ordinary course of business shall refer to transactions in the pursuit of the individual debtor's or debtor's business
operations prior to rehabilitation or insolvency proceedings and on ordinary business terms.
(z) Ownership interest shall refer to the ownership interest of third parties in property held by the debtor, including those
covered by trust receipts or assignments of receivables.
(aa) Parent shall refer to a corporation which has control over another corporation either directly or indirectly through
one or more intermediaries.
(bb) Party to the proceedings shall refer to the debtor, a creditor, the unsecured creditors' committee, a stakeholder, a
party with an ownership interest in property held by the debtor, a secured creditor, the rehabilitation receiver, liquidator
or any other juridical or natural person who stands to be benefited or injured by the outcome of the proceedings and
whose notice of appearance is accepted by the court.
(cc) Possessory lien shall refer to a lien on property, the possession of which has been transferred to a creditor or a
representative or agent thereof.
(dd) Proceedings shall refer to judicial proceedings commenced by the court's acceptance of a petition filed under this Act.
(ee) Property of others shall refer to property held by the debtor in which other persons have an ownership interest.

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(ff) Publication notice shall refer to notice through publication in a newspaper of general circulation in the Philippines on a
business day for two (2) consecutive weeks.
(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of successful operation and solvency, if it is
shown that its continuance of operation is economically feasible and its creditors can recover by way of the present value
of payments projected in the plan, more if the debtor continues as a going concern than if it is immediately liquidated.
(hh) Rehabilitation receiver shall refer to the person or persons, natural or juridical, appointed as such by the court
pursuant to this Act and which shall be entrusted with such powers and duties as set forth herein.
(ii) 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
settingup of new business entity as prescribed in Section 62 hereof, or other similar arrangements as may be approved
by the court or creditors.
(jj) Secured claim shall refer to a claim that is secured by a lien.
(kk) Secured creditor shall refer to a creditor with a secured claim.
(ll) Secured party shall refer to a secured creditor or the agent or representative of such secured creditor. (mm)
Securities market participant shall refer to a broker dealer, underwriter, transfer agent or other juridical persons
transacting securities in the capital market.
(nn) Stakeholder shall refer, in addition to a holder of shares of a corporation, to a member of a nonstock corporation or
association or a partner in a partnership.
(oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting stock of which is owned or
controlled directly or indirectly through one or more intermediaries by another corporation, which thereby becomes its
parent corporation.
(pp) Unsecured claim shall refer to a claim that is not secured by a lien.
(qq) Unsecured creditor shall refer to a creditor with an unsecured claim.
(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.
(ss) Voting creditor shall refer to a creditor that is a member of a class of creditors, the consent of which is necessary for
the approval of a Rehabilitation Plan under this Act.
Section 5. Exclusions. - The term debtor does not include banks, insurance companies, pre-need companies, and national
and local government agencies or units.
For purposes of this section:
(a) Bank shall refer to any duly licensed bank or quasi-bank that is potentially or actually subject to conservatorship,
receivership or liquidation proceedings under the New Central Bank Act (Republic Act No. 7653) or successor legislation;
(b) Insurance company shall refer to those companies that are potentially or actually subject to insolvency proceedings
under the Insurance Code (Presidential Decree No. 1460) or successor legislation; and
(c) Pre-need company shall refer to any corporation authorized/licensed to sell or offer to sell pre-need plans.
Provided, That government financial institutions other than banks and government-owned or controlled corporations shall
be covered by this Act, unless their specific charter provides otherwise.

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Section 6. Designation of Courts and Promulgation of Procedural Rules. - The Supreme Court shall designate the court or
courts that will hear and resolve cases brought under this Act and shall promulgate the rules of pleading, practice and
procedure to govern the proceedings brought under this Act.
Section 7. Substantive and Procedural Consolidation. - Each juridical entity shall be considered as a separate entity under
the proceedings in this Act. Under these proceedings, the assets and liabilities of a debtor may not be commingled or
aggregated with those of another, unless the latter is a related enterprise that is owned or controlled directly or indirectly
by the same interests: Provided, however, That the commingling or aggregation of assets and liabilities of the debtor with
those of a related enterprise may only be allowed where:
(a) there was commingling in fact of assets and liabilities of the debtor and the related enterprise prior to the
commencement of the proceedings;
(b) the debtor and the related enterprise have common creditors and it will be more convenient to treat them together
rather than separately;
(c) the related enterprise voluntarily accedes to join the debtor as party petitioner and to commingle its assets and
liabilities with the debtor's; and
(d) The consolidation of assets and liabilities of the debtor and the related enterprise is beneficial to all concerned and
promotes the objectives of rehabilitation.
Provided, finally, That nothing in this section shall prevent the court from joining other entities affiliated with
the debtor as parties pursuant to the rules of procedure as may be promulgated by the Supreme Court.
Section 8. Decisions of Creditors. - Decisions of creditors shall be made according to the relevant provisions of the
Corporation Code in the case of stock or nonstock corporations or the Civil Code in the case of partnerships that are not
inconsistent with this Act.
Section 9. Creditors Representatives. - Creditors may designate representatives to vote or otherwise act on their behalf
by filing notice of such representation with the court and serving a copy on the rehabilitation receiver or liquidator.
Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship, Partners in a Partnership, or Directors and
Officers. - Individual debtor, owner of a sole proprietorship, partners in a partnership, or directors and officers of a debtor
shall be liable for double the value of the property sold, embezzled or disposed of or double the amount of the
transaction involved, whichever is higher to be recovered for benefit of the debtor and the creditors, if they, having notice
of the commencement of the proceedings, or having reason to believe that proceedings are about to be commenced, or
in contemplation of the proceedings, willfully commit the following acts:
(a) Dispose or cause to be disposed of any property of the debtor other than in the ordinary course of business or
authorize or approve any transaction in fraud of creditors or in a manner grossly disadvantageous to the debtor and/or
creditors; or
(b) Conceal or authorize or approve the concealment, from the creditors, or embezzles or misappropriates, any property
of the debtor.
The court shall determine the extent of the liability of an owner, partner, director or officer under this section. In this
connection, in case of partnerships and corporations, the court shall consider the amount of the shareholding or
partnership or equity interest of such partner, director or officer, the degree of control of such partner, director or officer
over the debtor, and the extent of the involvement of such partner, director or debtor in the actual management of the
operations of the debtor.
Section 11. Authorization to Exchange Debt for Equity. - Notwithstanding applicable banking legislation to the contrary,
any bank, whether universal or not, may acquire and hold an equity

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interest or investment in a debtor or its subsidiaries when conveyed to such bank in satisfaction of debts pursuant to a
Rehabilitation or Liquidation Plan approved by the court: Provided, That such ownership shall be subject to the ownership
limits applicable to universal banks for equity investments and: Provided, further, That any equity investment or interest
acquired or held pursuant to this section shall be disposed by the bank within a period of five (5) years or as may be
prescribed by the Monetary Board.
CHAPTER II COURT-SUPERVISED REHABILITATION
(A) Initiation Proceedings.
(1) Voluntary Proceedings.
Section 12. Petition to Initiate Voluntary Proceedings by Debtor. - When approved by the owner in case of a sole
proprietorship, or by a majority of the partners in case of a partnership, or in case of a corporation, by a majority vote of
the board of directors or trustees and authorized by the vote of the stockholders representing at least two-thirds (2/3) of
the outstanding capital stock, or in case of nonstock corporation, by the vote of at least two-thirds (2/3) of the members,
in a stockholder's or member's meeting duly called for the purpose, an insolvent debtor may initiate voluntary
proceedings under this Act by filing a petition for rehabilitation with the court and on the grounds hereinafter specifically
provided. The petition shall be verified to establish the insolvency of the debtor and the viability of its rehabilitation, and
include, whether as an attachment or as part of the body of the petition, as a minimum the following:
(a) Identification of the debtor, its principal activities and its addresses;
(b) Statement of the fact of and the cause of the debtor's insolvency or inability to pay its obligations as they become due;
(c) The specific relief sought pursuant to this Act;
(d) The grounds upon which the petition is based;
(e) Other information that may be required under this Act depending on the form of relief requested;
(f) Schedule of the debtor's debts and liabilities including a list of creditors with their addresses, amounts of claims and
collaterals, or securities, if any;
(g) An inventory of all its assets including receivables and claims against third parties;
(h) A Rehabilitation Plan;
(i) The names of at least three (3) nominees to the position of rehabilitation receiver; and
(j) Other documents required to be filed with the petition pursuant to this Act and the rules of procedure as may be
promulgated by the Supreme Court.
A group of debtors may jointly file a petition for rehabilitation under this Act when one or more of its members foresee
the impossibility of meeting debts when they respectively fall due, and the financial distress would likely adversely affect
the financial condition and/or operations of the other members of the group and/or the participation of the other
members of the group is essential under the terms and conditions of the proposed Rehabilitation Plan.
(2) Involuntary Proceedings. Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. - Any creditor or
group of creditors with a claim of, or the aggregate of whose claims is, at least One Million Pesos (Php1,000,000.00) or at
least twenty-five percent (25%) of the subscribed capital stock or partners' contributions, whichever is higher, may
initiate involuntary proceedings against the debtor by filing a petition for rehabilitation with the court if:
(a) there is no genuine issue of fact on law on the claim/s of the petitioner/s, and that the due and demandable
payments thereon have not been made for at least sixty (60) days or that the debtor has failed generally to meet its
liabilities as they fall due; or
(b) a creditor, other than the petitioner/s, has initiated foreclosure proceedings against the debtor that will prevent the
debtor from paying its debts as they become due or will render it insolvent.

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Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition for rehabilitation shall be verified to
establish the substantial likelihood that the debtor may be rehabilitated, and include:
(a) identification of the debtor its principal activities and its address;
(b) the circumstances sufficient to support a petition to initiate involuntary rehabilitation proceedings under Section 13 of
this Act;
(c) the specific relief sought under this Act;
(d) a Rehabilitation Plan;
(e) the names of at least three (3) nominees to the position of rehabilitation receiver;
(f) other information that may be required under this Act depending on the form of relief requested; and
(g) other documents required to be filed with the petition pursuant to this Act and the rules of procedure as may be
promulgated by the Supreme Court.
(B) Action on the Petition and Commencement of Proceedings
Section 15. Action on the Petition. - If the court finds the petition for rehabilitation to be sufficient in form and substance,
it shall, within five (5) working days from the filing of the petition, issue a Commencement Order. If, within the same
period, the court finds the petition deficient in form or substance, the court may, in its discretion, give the petitioner/s a
reasonable period of time within which to amend or supplement the petition, or to submit such documents as may be
necessary or proper to put the petition in proper order. In such case, the five (5) working days provided above for the
issuance of the Commencement Order shall be reckoned from the date of the filing of the amended or supplemental
petition or the submission of such documents.
Section 16. Commencement of Proceedings and Issuance of a Commencement Order. - The rehabilitation proceedings
shall commence upon the issuance of the Commencement Order, which shall:
(a) identify the debtor, its principal business or activity/ies and its principal place of business;
(b) summarize the ground/s for initiating the proceedings;
(c) state the relief sought under this Act and any requirement or procedure particular to the relief sought;
(d) state the legal effects of the Commencement Order, including those mentioned in Section 17 hereof;
(e) declare that the debtor is under rehabilitation;
(f) direct the publication of the Commencement Order in a newspaper of general circulation in the Philippines once a
week for at least two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of
its issuance;
(g) If the petitioner is the debtor direct the service by personal delivery of a copy of the petition on each creditor holding
at least ten percent (10%) of the total liabilities of the debtor as determined from the schedule attached to the petition
within five (5) days; if the petitioner/s is/are creditor/s, direct the service by personal delivery of a copy of the petition on
the debtor within five (5) days;
(h) appoint a rehabilitation receiver who may or not be from among the nominees of the petitioner/s and who shall
exercise such powers and duties defined in this Act as well as the procedural rules that the Supreme Court will
promulgate;
(i) summarize the requirements and deadlines for creditors to establish their claims against the debtor and direct all
creditors to their claims with the court at least five (5) days before the initial hearing;
(j) direct Bureau of internal Revenue (BIR) to file and serve on the debtor its comment on or opposition to the petition or
its claim/s against the debtor under such procedures as the Supreme Court provide;
(k) prohibit the debtor's suppliers of goods or services from withholding the supply of goods and services in the ordinary
course of business for as long as the debtor makes payments for the services or goods supplied after the issuance of the
Commencement Order;
(l) authorize the payment of administrative expenses as they become due;
(m) set the case for initial hearing, which shall not be more than forty (40) days from the date of filing of the petition for
the purpose of determining whether there is substantial likelihood for the debtor to be rehabilitated;

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(n) make available copies of the petition and rehabilitation plan for examination and copying by any interested party;
(o) indicate the location or locations at which documents regarding the debtor and the proceedings under Act may be
reviewed and copied;
(p) state that any creditor or debtor who is not the petitioner, may submit the name or nominate any other qualified
person to the position of rehabilitation receiver at least five (5) days before the initial hearing;
(q) include s Stay or Suspension Order which shall:
(1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor;
(2) suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor;
(3) prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties
except in the ordinary course of business; and
(4) prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date
except as may be provided herein.
Section 17. Effects of the Commencement Order. - Unless otherwise provided for in this Act, the court's issuance of a
Commencement Order shall, in addition to the effects of a Stay or Suspension Order described in Section 16 hereof:
(a) vest the rehabilitation with all the powers and functions provided for this Act, such as the right to review and obtain
records to which the debtor's management and directors have access, including bank accounts or whatever nature of the
debtor subject to the approval by the court of the performance bond filed by the rehabilitation receiver;
(b) prohibit or otherwise serve as the legal basis rendering null and void the results of any extrajudicial activity or process
to seize property, sell encumbered property, or otherwise attempt to collection or enforce a claim against the debtor after
commencement date unless otherwise allowed in this Act, subject to the provisions of Section 50 hereof;
(c) serve as the legal basis for rendering null and void any setoff after the commencement date of any debt owed to the
debtor by any of the debtor's creditors;
(d) serve as the legal basis for rendering null and void the perfection of any lien against the debtor's property after the
commencement date; and
(e) consolidate the resolution of all legal proceedings by and against the debtor to the court Provided. However, That the
court may allow the continuation of cases on other courts where the debtor had initiated the suit.
Attempts to seek legal of other resource against the debtor outside these proceedings shall be sufficient to support a
finding of indirect contempt of court.
Section 18. Exceptions to the Stay or Suspension Order. - The Stay or Suspension Order shall not apply:
(a) to cases already pending appeal in the Supreme Court as of commencement date Provided, That any final and
executory judgment arising from such appeal shall be referred to the court for appropriate action;
(b) subject to the discretion of the court, to cases pending or filed at a specialized court or quasi-judicial agency which,
upon determination by the court is capable of resolving the claim more quickly, fairly and efficiently than the court:
Provided, That any final and executory judgment of such court or agency shall be referred to the court and shall be
treated as a non-disputed claim;
(c) to the enforcement of claims against sureties and other persons solidarily liable with the debtor, and third party or
accommodation mortgagors as well as issuers of letters of credit, unless the property subject of the third party or
accommodation mortgage is necessary for the rehabilitation of the debtor as determined by the court upon
recommendation by the rehabilitation receiver;

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(d) to any form of action of customers or clients of a securities market participant to recover or otherwise claim moneys
and securities entrusted to the latter in the ordinary course of the latter's business as well as any action of such securities
market participant or the appropriate regulatory agency or self-regulatory organization to pay or settle such claims or
liabilities;
(e) to the actions of a licensed broker or dealer to sell pledged securities of a debtor pursuant to a securities pledge or
margin agreement for the settlement of securities transactions in accordance with the provisions of the Securities
Regulation Code and its implementing rules and regulations;
(f) the clearing and settlement of financial transactions through the facilities of a clearing agency or similar entities duly
authorized, registered and/or recognized by the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP)
and the SEC as well as any form of actions of such agencies or entities to reimburse themselves for any transactions
settled for the debtor; and
(g) any criminal action against individual debtor or owner, partner, director or officer of a debtor shall not be affected by
any proceeding commend under this Act.
Section 19. Waiver of taxes and Fees Due to the National Government and to Local Government Units (LGUs). - Upon
issuance of the Commencement Order by the court, and until the approval of the Rehabilitation Plan or dismissal of the
petition, whichever is earlier, the imposition of all taxes and fees including penalties, interests and charges thereof due to
the national government or to LGUs shall be considered waived, in furtherance of the objectives of rehabilitation.
Section 20. Application of Stay or Suspension Order to Government Financial Institutions. - The provisions of this Act
concerning the effects of the Commencement Order and the Stay or Suspension Order on the suspension of rights to
foreclose or otherwise pursue legal remedies shall apply to government financial institutions, notwithstanding provisions
in their charters or other laws to the contrary.
Section 21. Effectivity and Duration of Commencement Order. - Unless lifted by the court, the Commencement Order
shall be for the effective for the duration of the rehabilitation proceedings for as long as there is a substantial likelihood
that the debtor will be successfully rehabilitated. 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:
(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

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(g) The debtor has not committed acts misrepresentation or in fraud of its creditor/s or a group of creditors.
Section 22. Action at the Initial Hearing. - At the initial hearing, the court shall:
(a) determine the creditors who have made timely and proper filing of their notice of claims;
(b) hear and determine any objection to the qualifications of the appointment of the rehabilitation receiver and, if
necessary appoint a new one in accordance with this Act;
(c) direct the creditors to comment on the petition and the Rehabilitation Plan, and to submit the same to the court and
to the rehabilitation receiver within a period of not more than twenty (20) days; and
(d) direct the rehabilitation receiver to evaluate the financial condition of the debtor and to prepare and submit to the
court within forty (40) days from initial hearing the report provided in Section 24 hereof.
Section 23. Effect of Failure to File Notice of Claim. - A creditor whose claim is not listed in the schedule of debts and
liabilities and who fails to file a notice of claim in accordance with the Commencement Order but subsequently files a
belated claim shall not be entitled to participate in the rehabilitation proceedings but shall be entitled to receive
distributions arising therefrom.
Section 24. Report of the Rehabilitation Receiver. - Within forty (40) days from the initial hearing and with or without the
comments of the creditors or any of them, the rehabilitation receiver shall submit a report to the court stating his
preliminary findings and recommendations on whether:
(a) the debtor is insolvent and if so, the causes thereof and any unlawful or irregular act or acts committed by the
owner/s of a sole proprietorship partners of a partnership or directors or officers of a corporation in contemplation of the
insolvency of the debtor or which may have contributed to the insolvency of the debtor;
(b) the underlying assumptions, the financial goals and the procedures to accomplish such goals as stated in the
petitioner's Rehabilitation Plan are realistic, feasible and reasonable;
(c) there is a substantial likelihood for the debtor to be successfully rehabilitated;
(d) the petition should be dismissed; and
(e) the debtor should be dissolved and/or liquidated.
Section 25. Giving Due Course to or Dismissal of Petition, or Conversion of Proceedings. - Within ten (10) days from
receipt of the report of the rehabilitation receiver mentioned in Section 24 hereof the court may:
(a) give due course to the petition upon a finding that:

(1) the debtor is insolvent; and
(2) there is a substantial likelihood for the debtor to be successfully rehabilitated;
(b) dismiss the petition upon a finding that:
(1) debtor is not insolvent;

(2) the petition i8 a sham filing intended only to delay the enforcement of the rights of the creditor/s or of
any group of creditors;
(3) the petition, the Rehabilitation Plan and the attachments thereto contain any materially false or
misleading statements; or
(4) the debtor has committed acts of misrepresentation or in fraud of its creditor/s or a group of creditors;
(c)convert the proceedings into one for the liquidation of the debtor upon a finding that:
(1) the debtor is insolvent; and

(2) there is no substantial likelihood for the debtor to be successfully rehabilitated as determined in accordance with
the rules to be promulgated by the Supreme Court.
Section 26.Petition Given Due Course. - If the petition is 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.
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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.
Section 27.Dismissal of Petition. - If the petition is dismissed pursuant to paragraph (b) of Section 25 hereof, 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.
(C) The Rehabilitation Receiver, Management Committee and Creditors' Committee.
Section 28.Who May Serve as a Rehabilitation Receiver. - Any qualified natural or juridical person may serve as a
rehabilitation receiver: Provided, That if the rehabilitation receiver is a juridical entity, it must designate a natural
person/s who possess/es all the qualifications and none of the disqualification’s as its representative, it being understood
that the juridical entity and the representative/s are solidarily liable for all obligations and responsibilities of the
rehabilitation receiver.
Section 29.Qualifications of a Rehabilitation Receiver. - The rehabilitation receiver shall have the following minimum
qualifications:
(a) A citizen of the Philippines or a resident of the Philippines in the six (6) months immediately preceding his
nomination;
(b) Of good moral character and with acknowledged integrity, impartiality and independence;
(c) Has the requisite knowledge of insolvency and other relevant commercial laws, rules and procedures, as
well as the relevant training and/or experience that may be necessary to enable him to properly discharge the duties and
obligations of a rehabilitation receiver; and
(d) Has no conflict of interest: Provided, That such conflict of interest may be waived, expressly or impliedly,
by a party who may be prejudiced thereby.
Other qualifications and disqualification’s of the rehabilitation receiver shall be set forth in procedural rules, taking into
consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned.
Section 30.Initial Appointment of the Rehabilitation Receiver. - The court shall initially appoint the rehabilitation receiver,
who mayor may not be from among the nominees of the petitioner, However, at the initial hearing of the petition, the
creditors and the debtor who are not petitioners may nominate other persons to the position. The court may retain the
rehabilitation receiver initially appointed or appoint another who mayor may not be from among those nominated.
In case the debtor is a securities market participant, the court shall give priority to the nominee of the appropriate
securities or investor protection fund.
If a qualified natural person or entity is nominated by more than fifty percent (50%) of the secured creditors and the
general unsecured creditors, and satisfactory evidence is submitted, the court shall appoint the creditors' nominee as
rehabilitation receiver.
Section 31.Powers, Duties and Responsibilities of the Rehabilitation Receiver. - The rehabilitation receiver shall be
deemed an officer of the court with the principal duty of preserving and maximizing the value of the assets of the debtor
during the rehabilitation proceedings, determining the viability of the rehabilitation of the debtor, preparing and
recommending a Rehabilitation Plan to the court, and implementing the approved Rehabilitation Plan, To this end, and
without limiting the generality of the foregoing, the rehabilitation receiver shall have the following powers, duties and
responsibilities:

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(a) To verify the accuracy of the factual allegations in the petition and its annexes;
(b) To verify and correct, if necessary, the inventory of all of the assets of the debtor, and their valuation;
(c) To verify and correct, if necessary, the schedule of debts and liabilities of the debtor;
(d) To evaluate the validity, genuineness and true amount of all the claims against the debtor;
(e) To take possession, custody and control, and to preserve the value of all the property of the debtor;
(f) To sue and recover, with the approval of the court, all amounts owed to, and all properties pertaining to the debtor;
(g) To have access to all information necessary, proper or relevant to the operations and business of the debtor and for
its rehabilitation
(h) To sue and recover, with the. approval of the court, all property or money of the debtor paid, transferred or disbursed
in fraud of the debtor or its creditors, or which constitute undue preference of creditor/s;
(i) To monitor the operations and the business of the debtor to ensure that no payments or transfers of property are
made other than in the ordinary course of business;
(j) With the court's approval, to engage the services of or to employ persons or entities to assist him in the discharge of
his functions;
(k) To determine the manner by which the debtor may be best rehabilitated, to review) revise and/or recommend action
on the Rehabilitation Plan and submit the same or a new one to the court for approval;
(l) To implement the Rehabilitation Plan as approved by the court, if 80 provided under the Rehabilitation Plan;
(m) To assume and exercise the powers of management of the debtor, if directed by the court pursuant to Section 36
hereof;
(n) To exercise such other powers as may, from time to time, be conferred upon him by the court; and
To submit a status report on the rehabilitation proceedings every quarter or as may be required by the court motu
proprio. or upon motion of any creditor. or as may be provided, in the Rehabilitation Plan. Unless appointed by the court,
pursuant to Section 36 hereof, the rehabilitation receiver shall not take over the management and control of the debtor
but may recommend the appointment of a management committee over the debtor in the cases provided by this Act.
Section 32.Removal of the Rehabilitation Receiver. – The rehabilitation receiver may be removed at any time by the court
either motu proprio or upon motion by any creditor/s holding more than fifty percent (50%) of the total obligations of the
debtor, on such grounds as the rules of procedure may provide which shall include, but are not limited to, the following:
(a) Incompetence, gross negligence, failure to perform or failure to exercise the proper degree of care in the
performance of his duties and powers;
(b) Lack of a particular or specialized competency required by the specific case;
(c) Illegal acts or conduct in the performance of his duties and powers;
(d) Lack of qualification or presence of any disqualification;
(e) Conflict of interest that arises after his appointment; and
(f) Manifest lack of independence that is detrimental to the general body of the stakeholders.
Section 33.Compensation and Terms of Service. The rehabilitation receiver and his direct employees or independent
contractors shall be entitled to compensation for reasonable fees and expenses from the debtor according to the terms
approved by the court after notice and hearing. Prior to such hearing, the rehabilitation receiver and his direct employees
shall be entitled to reasonable compensation based on quantum meruit. Such costs shall be considered administrative
expenses.
Section 34.Oath and Bond of the Rehabilitation Receiver. Prior to entering upon his powers, duties and responsibilities,
the rehabilitation receiver shall take an oath and file a bond, in such amount to be fixed by the court, conditioned upon
the faithful and proper discharge of his powers, duties and responsibilities.

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Section 35.Vacancy. - Incase the position of rehabilitation receiver is vacated for any reason whatsoever. the court shall
direct the debtor and the creditors to submit the name/s of their nominee/s to the position. The court may appoint any of
the qualified nominees. or any other person qualified for the position.
Section 36.Displacement of Existing Management by the Rehabilitation Receiver or Management Committee. – Upon
motion of any interested party, the court may appoint and direct the rehabilitation receiver to assume the powers of
management of the debtor, or appoint a management committee that will undertake the management of the debtor.
upon clear and convincing evidence of any of the following circumstances:
(a) Actual or imminent danger of dissipation, loss, wastage or destruction of the debtor’s assets or other properties;
(b) Paralyzation of the business operations of the debtor; or
(c) Gross mismanagement of the debtor. or fraud or other wrongful conduct on the part of, or gross or willful violation of
this Act by. existing management of the debtor Or the owner, partner, director, officer or representative/s in
management of the debtor.
In case the court appoints the rehabilitation receiver to assume the powers of management of the debtor. the court may:
(1) require the rehabilitation receiver to post an additional bond;

(2) authorize him to engage the services or to employ persona or entities to assist him in the discharge of his
managerial functions; and
(3) authorize a commensurate increase in his compensation.
Section 37.Role of the Management Committee. – When appointed pursuant to the foregoing section, the management
committee shall take the place of the management and the governing body of the debtor and assume their rights and
responsibilities. The specific powers and duties of the management committee, whose members shall be considered as
officers of the court, shall be prescribed by the procedural rules.
Section 38.Qualifications of Members of the Management Committee. - The qualifications and disqualification’s of the
members of the management committee shall be set forth in the procedural rules, taking into consideration the nature of
the business of the debtor and the need to protect the interest of all stakeholders concerned.
Section 39.Employment of Professionals. - Upon approval of the court, and after notice and hearing, the rehabilitation
receiver or the management committee may employ specialized professionals and other experts to assist each in the
performance of their duties. Such professionals and other experts shall be considered either employees or independent
contractors of the rehabilitation receiver or the management committee, as the case may be. The qualifications and
disqualification’s of the professionals and experts may be set forth in procedural rules, taking into consideration the
nature of the business of the debtor and the need to protect the interest of all stakeholders concerned.
Section 40.Conflict of Interest. - No person may be appointed as a rehabilitation receiver, member of a_ management
committee, or be employed by the rehabilitation receiver or the management committee if he has a conflict of interest.
An individual shall be deemed to have a conflict of interest if he is so situated as to be materially influenced in the
exercise of his judgment for or against any party to the proceedings. Without limiting the generality of the foregoing, an
individual shall be deemed to have a conflict of interest if:
(a) he is a creditor, owner, partner or stockholder of the debtor;

(b) he is engaged in a line of business which competes with that of the debtor;
(c) he is, or was, within five (5) years from the filing of the petition, a director, officer, owner, partner or employee of the
debtor or any of the creditors, or the auditor or accountant of the debtor;
(d) he is, or was, within two (2) years from the filing of the petition, an underwriter of the outstanding securities of the
debtor;

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(e) he is related by consanguinity or affinity within the fourth civil degree to any individual creditor, owners of a sale
proprietorship-debtor, partners of a partnership- debtor or to any stockholder, director, officer, employee or underwriter
of a corporation-debtor; or
(f) he has any other direct or indirect material interest in the debtor or any of the creditors.
Any rehabilitation receiver, member of the management committee or persons employed or contracted by them
possessing any conflict of interest shall make the appropriate disclosure either to the court or to the creditors in case of
out-of-court rehabilitation proceedings. Any party to the proceeding adversely affected by the appointment of any person
with a conflict of interest to any of the positions enumerated above may however waive his right to object to such
appointment and, if the waiver is unreasonably withheld, the court may disregard the conflict of interest, taking into
account the general interest of the stakeholders.
Section 41.Immunity. - The rehabilitation receiver and all persons employed by him, and the members of the
management committee and all persons employed by it, shall not be subject to any action. claim or demand in
connection with any act done or omitted to be done by them in good faith in connection with the exercise of their powers
and functions under this Act or other actions duly approved by the court.
Section 42.Creditors' Committee. - After the creditors' meeting called pursuant to Section 63 hereof, the creditors
belonging to a class may formally organize a committee among themselves. In addition, the creditors may, as a body,
agree to form a creditors' committee composed of a representative from each class of creditors, such as the following:
(a) Secured creditors;

(b) Unsecured creditors;
(c) Trade creditors and suppliers; and
(d) Employees of the debtor.
In the . election of the creditors' representatives, the rehabilitation receiver or his representative shall attend such
meeting and extend the appropriate assistance as may be defined in the procedural rules.
Section 43.Role of Creditors' Committee. - The creditors' committee when constituted pursuant to Section 42 of this Act
shall assist the rehabilitation receiver in communicating with the creditors and shall be the primary liaison between the
rehabilitation receiver and the creditors. The creditors' committee cannot exercise or waive any right or give any consent
on behalf of any creditor unless specifically authorized in writing by such creditor. The creditors' committee may be
authorized by the court or by the rehabilitation receiver to perform such other tasks and functions as may be defined by
the procedural rules in order to facilitate the rehabilitation process.
(D) Determination of Claims.
Section 44. Registry of Claims. - Within twenty (20) days from his assumption into office, the rehabilitation receiver shall
establish a preliminary registry of claims. The rehabilitation receiver shall make the registry available for public inspection
and provide publication notice to the debtor, creditors and stakeholders on where and when they may inspect it. All
claims included in the registry of claims must be duly supported by sufficient evidence.
Section 45.Opposition or Challenge of Claims. – Within thirty (30) days from the expiration of the period stated in the
immediately preceding section, the debtor, creditors, stakeholders and other interested parties may submit a challenge to
claim/s to the court, serving a certified copy on the rehabilitation receiver and the creditor holding the challenged
claim/so Upon the expiration of the thirty (30)-day period, the rehabilitation receiver shall submit to the court the registry
of claims which shall include undisputed claims that have not been subject to challenge.
Section 46.Appeal. - Any decision of the rehabilitation receiver regarding a claim may be appealed to the court.
(E) Governance

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Section 47.Management. - Unless otherwise provided herein, the management of the juridical debtor shall remain with
the existing management subject to the applicable law/s and agreement/s, if any, on the election or appointment of
directors, managers Or managing partner. However, all disbursements, payments or sale, disposal, assignment, transfer
or encumbrance of property , or any other act affecting title or interest in property, shall be subject to the approval of the
rehabilitation receiver and/or the court, as provided in the following subchapter.
(F) Use, Preservation and Disposal of Assets and Treatment of Assets and Claims after Commencement Date.
Section 48.Use or Disposition of Assets. - Except as otherwise provided herein, no funds or property of the debtor shall
he used or disposed of except in the ordinary course of business of the debtor, or unless necessary to finance the
administrative expenses of the rehabilitation proceedings.
Section 49.Sale of Assets. - The court, upon application of the rehabilitation receiver, may authorize the sale of
unencumbered property of the debtor outside the ordinary course of business upon a showing that the property, by its
nature or because of other circumstance, is perishable, costly to maintain, susceptible to devaluation or otherwise
injeopardy.
Section 50.Sale or Disposal of Encumbered Property of the Debtor and Assets of Third Parties Held by Debtor. The court
may authorize the sale, transfer, conveyance or disposal of encumbered property of the debtor, or property of others
held by the debtor where there is a security interest pertaining to third parties under a financial, credit or other similar
transactions if, upon application of the rehabilitation receiver and with the consent of the affected owners of the property,
or secured creditor/s in the case of encumbered property of the debtor and, after notice and hearing, the court
determines that:
(a) such sale, transfer, conveyance or disposal is necessary for the continued operation of the debtor's business;
and
(b) the debtor has made arrangements to provide a substitute lien or ownership right that provides an equal level
of security for the counter-party's claim or right.
Provided, That properties held by the debtor where the debtor has authority to sell such as trust receipt or consignment
arrangements may be sold or disposed of by the .debtor, if such sale or disposal is necessary for the operation of the
debtor's business, and the debtor has made arrangements to provide a substitute lien or ownership right that provides an
equal level of security for the counter-party's claim or right.
Sale or disposal of property under this section shall not give rise to any criminal liability under applicable laws.
Section 51.Assets of Debtor Held by Third Parties. – In the case of possessory pledges, mechanic's liens or similar claims,
third parties who have in their possession or control property of the debtor shall not transfer, conveyor otherwise dispose
of the same to persons other than the debtor, unless upon prior approval of the rehabilitation receiver. The rehabilitation
receiver may also:
(a) demand the surrender or the transfer of the possession or control of such property to the rehabilitation
receiver or any other person, subject to payment of the claims secured by any possessory Iien/s thereon;
(b) allow said third parties to retain possession or control, if such an arrangement would more likely preserve or
increase the value of the property in question or the total value of the assets of the debtor; or
(c) undertake any otI1er disposition of the said property as may be beneficial for the rehabilitation of the debtor,
after notice and hearing, and approval of the court.

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Section 52.Rescission or Nullity of Sale, Payment, Transfer or Conveyance of Assets. - The court may rescind or declare
as null and void any sale, payment, transfer or conveyance of the debtor's unencumbered property or any encumbering
thereof by the debtor or its agents or representatives after the commencement date which are not in the ordinary course
of the business of the debtor: Provided, however, That the unencumbered property may be sold, encumbered or
otherwise disposed of upon order of the court after notice and hearing:
(a) if such are in the interest of administering the debtor and facilitating the preparation and implementation of a
Rehabilitation Plan;
(b) in order to provide a substitute lien, mortgage or pledge of property under this Act;
(c) for payments made to meet administrative expenses as they arise;
(d) for payments to victims of quasi delicts upon a showing that the claim is valid and the debtor has insurance to
reimburse the debtor for the payments made;
(e) for payments made to repurchase property of the debtor that is auctioned off in a judicial or extrajudicial sale
under. This Act; or
(f) for payments made to reclaim property of the debtor held pursuant to a possessory lien.
Section 53.Assets Subject to Rapid Obsolescence, Depreciation and Diminution of Value. - Upon the application of a
secured creditor holding a lien against or holder of an ownership interest in property held by the debtor that is subject to
potentially rapid obsolescence, depreciation or diminution in value, the court shall, after notice and hearing, order the
debtor or rehabilitation receiver to take reasonable steps necessary to prevent the depreciation. If depreciation cannot be
avoided and such depreciation is jeopardizing the security or property interest of the secured creditor or owner, the court
shall:
(a) allow the encumbered property to be foreclosed upon by the secured creditor according to the relevant
agreement between the debtor and the secured creditor, applicable rules of procedure and relevant legislation: Provided.
That the proceeds of the sale will be distributed in accordance with the order prescribed under the rules of concurrence
and preference of credits; or
(b) upon motion of, or with the consent of the affected secured creditor or interest owner. order the conveyance
of a lien against or ownership interest in substitute property of the debtor to the secured creditor: Provided. That other
creditors holding liens on such property, if any, do not object thereto, or, if such property is not available;
(c) order the conveyance to the secured creditor or holder . of an ownership interest of a lien on the residual
funds from the sale of encumbered property during the proceedings; or
(d) allow the sale or disposition of the property: Provided. That the sale or disposition will maximize the value of
the property for the benefit of the secured creditor and the debtor, and the proceeds of the sale will be distributed in
accordance with the order prescribed under the rules of concurrence and preference of credits.
Section 54.Post-commencement Interest. - The rate and term of interest, if any, on secured and unsecured claims shall
be determined and provided for in the approved Rehabilitation Plan.
Section 55.Post-commencement Loans and Obligations. - With the approval of the court upon the recommendation of the
rehabilitation receiver, the debtor, in order to enhance its rehabilitation. may:
(a) enter into credit arrangements; or

(b) enter into credit arrangements, secured by mortgages of its unencumbered property or secondary mortgages
of encumbered property with the approval of senior secured parties with regard to the encumbered property; or
(c) incur other obligations as may be essential for its rehabilitation.
The payment of the foregoing obligations shall be considered administrative expenses under this Act.

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Section 56.Treatment of Employees, Claims. Compensation of employees required to carry on the business shall be
considered an administrative expense. Claims of separation pay for months worked prior to the commencement date shall
be considered a pre- ommencement claim. Claims for salary and separation pay for work performed after the
commencement date shall be an administrative expense.
Section 57.Treatment of Contracts. - Unless cancelled by virtue of a final judgment of a court of competent jurisdiction
issued prior to the issuance of the Commencement Order, or at anytime thereafter by the court before which the
rehabilitation proceedings are pending, all valid and subbsisting contracts of the debtor with creditors and other third
parties as at the commencement date shall continue in force: Provided, That within ninety (90) days following the
commencement of proceedings, the debtor, with the consent of the rehabilitation receiver, shall notify each contractual
counter-party of whether it is confirming the particular contract. Contractual obligations of the debtor arising or
performed during this period, and afterwards for confirmed contracts, shall be considered administrative expenses.
Contracts not confirmed within the required deadline shall be considered terminated. Claims for actual damages, if any,
arising as a result of the election to terminate a contract shall be considered a pre-commencement claim against the
debtor. Nothing contained herein shall prevent the cancellation or termination of any contract of the debtor for any
ground provided by law.
(G) Avoidance Proceedings.
Section 58.Rescission or Nullity of Certain Pre-commencement Transactions. Any transaction occurring prior to
commencement date entered into by the debtor or involving its funds or assets may be rescinded or declared null and
void on the ground that the same was executed with intent to defraud a creditor or creditors or which constitute undue
preference of creditors. Without limiting the generality of the foregoing, a disputable presumption of such design shall
arise if the transaction:
(a) provides unreasonably inadequate consideration to the debtor and is executed within ninety (90) days prior to
the commencement date;
(b) involves an accelerated payment of a claim to a creditor within ninety (90) days prior to the commencement
date;
(c) provides security or additional security executed within ninety (90) days prior to the commencement date;
(d) involves creditors, where a creditor obtained, or received the benefit of, more than its pro rata share in the
assets of the debtor, executed at a time when the debtor was insolvent; or
(e) is intended to defeat, delay or hinder the ability of the creditors to collect claims where the effect of the
transaction is to put assets of the debtor beyond the reach of creditors or to otherwise prejudice the interests of creditors.
Provided, however, That nothing in this section shall prevent the court from rescinding or declaring as null and void a
transaction on other grounds provided by relevant legislation and jurisprudence: Provided, further, That the provisions of
the Civil Code on rescission shall in any case apply to these transactions.
Section 59.Actions for Rescission or Nullity. - (a) The rehabilitation receiver or, with his conformity, any creditor may
initiate and prosecute any action to rescind, or declare null and void any transaction described in Section 58 hereof. If the
rehabilitation receiver does not consent to the filing or prosecution of such action,
(b) If leave of court is granted under subsection (a), the rehabilitation receiver shall assign and transfer to the creditor all
rights, title and interest in the chose in action or subject matter of the proceeding, including any document in support
thereof.
(c) Any benefit derived from a proceeding taken pursuant to subsection (a), to the extent of his claim and the costs,
belongs exclusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate.

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(d) Where, before an order is made under subsection (a), the rehabilitation receiver (or liquidator) signifies to the court
his readiness to institute the proceeding for the benefit of the creditors, the order shall fix the time within which he shall
do so and, m that case, the benefit derived from the proceeding, if instituted within the time limits so fixed, belongs to
the estate.
(H) Treatment of Secured Creditors.
Section 60.No Diminution of Secured Creditor Rights. The issuance of the Commencement Order and the Suspension or
Stay Order, and any other provision of this Act, shall not be deemed in any way to diminish or impair the security or lien
of a secured creditor, or the value of his lien or security, except that his right to enforce said security or lien may be
suspended during the term of the Stay Order. The court, upon motion or recommendation of the rehabilitation receiver,
may allow a secured creditor to enforce his security or lien, or foreclose upon property of the debtor securing his/its claim,
if the said property is not necessary for the rehabilitation of the debtor. The secured creditor and/or the other lien holders
shall be admitted to the rehabilitation proceedings only for the balance of his claim, if any.
Section 61.Lack of Adequate Protection. - The court, on motion or motu proprio, may terminate, modify or set conditions
for the continuance of suspension of payment, or relieve a claim from the coverage thereof, upon showing that:
(a) a creditor does not have adequate protection over property securing its claim; or
(b) the value of a claim secured by a lien on property which is not necessary for rehabilitation of the debtor exceeds
the fair market value of the said property.
For purposes of this section, a creditor shall be deemed to lack adequate protection if it can be shown that:
(a) the debtor fails or refuses to honor a pre-existing agreement with the creditor to keep the property insured;
(b) the debtor fails or refuses to take commercially reasonable steps to maintain the property; or
(c) the property has depreciated to an extent that the creditor is under secured.
Upon showing of a lack of protection, the court shall order the debtor or the rehabilitation receiver to make arrangements
to provide for the insurance or maintenance of the property; or to make payments or otherwise provide additional or
replacement security such that the obligation is fully secured. If such arrangements are not feasible, the court may
modify the Stay Order to allow the secured creditor lacking adequate protection to enforce its security claim against the
debtor: Provided, however, That the court may deny the creditor the remedies in this paragraph if the property subject of
the enforcement is required for the rehabilitation of the debtor.
(i) Administration of Proceedings.
Section 62.Contents of a Rehabilitation Plan. – The Rehabilitation Plan shall, as a minimum:
(a) specify the underlying assumptions, the financial goals and the procedures proposed to accomplish such goals;
(b) compare the amounts expected to be received by the creditors under the Rehabilitation Plan with those that
they will receive if liquidation ensues within the next one hundred twenty (120) days;
(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;

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(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;
(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;
(l) 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.
(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.
Section 63.Consultation with Debtor and Creditors. – if the court gives due course to the petition, the rehabilitation
receiver shall confer with the debtor and all the classes of creditors, and may consider their views and proposals ill the
review, revision or preparation of a new Rehabilitation Plan.
Section 64.Creditor Approval of Rehabilitation Plan. – The rehabilitation receiver shall notify the creditors and
stakeholders that the Plan is ready for their examination. Within twenty (2Q) days from the said notification, the
rehabilitation receiver shall convene the creditors, either as a whole or per class, for purposes of voting on the approval
of the Plan. The Plan shall be deemed rejected unless approved by all classes of creditors w hose rights are adversely
modified or affected by the Plan. For purposes of this section, the Plan is deemed to have been approved by a class of
creditors if members of the said class holding more than fifty percent (50%) of the total claims of the said class vote in
favor of the Plan. The votes of the creditors shall be based solely on the amount of their respective claims based on the
registry of claims submitted by the rehabilitation receiver pursuant to Section 44 hereof.
Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm the Rehabilitation Plan if all of the
following circumstances are present:
(a) The Rehabilitation Plan complies with the requirements specified in this Act.
(b) The rehabilitation receiver recommends the confirmation of the Rehabilitation Plan;
(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.

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Section 65.Submission of Rehabilitation Plan to the Court. - 1fthe Rehabilitation Plan is approved, the rehabilitation
receiver shall submit the same to the court for confirmation. Within five (5) days from receipt of the Rehabilitation Plan,
the court shall notify the creditors that the Rehabilitation Plan has been submitted for confirmation, that any creditor may
obtain copies of the Rehabilitation Plan and that any creditor may file an objection thereto.
Section 66.Filing of Objections to Rehabilitation Plan. – A creditor may file an objection to the Rehabilitation Plan within
twenty (20) days from receipt of notice from the court that the Rehabilitation Plan has been submitted for confirmation.
Objections to a Rehabilitation Plan shall be limited to the following:
(a) The creditors' support was induced by fraud;

(b) The documents or data relied upon in the Rehabilitation Plan are materially false or misleading; or
(c) The Rehabilitation Plan is in fact not supported by the voting creditors.
Section 67.Hearing on the Objections. - If objections have been submitted during the relevant period, the court shall
issue an order setting the time and date for the hearing or hearings on the objections. If the court finds merit in the
objection, it shall order the rehabilitation receiver or other party to cure the defect, whenever feasible. If the court
determines that the debtor acted in bad faith, or that it is not feasible to cure the defect, the court shall convert the
proceedings into one for the liquidation of the debtor under Chapter V of this Act.
Section 68.Confirmation of the Rehabilitation Plan. – If no objections are filed within the relevant period or, if objections
are filed, the court finds them lacking in merit, or determines that the basis for the objection has been cured, or
determines that the debtor has complied with an order to cure the objection, the court shall issue an order confirming the
Rehabilitation Plan.
The court may confirm the Rehabilitation Plan notwithstanding unresolved disputes over claims if the Rehabilitation Plan
has made adequate provisions for paying such claims. For the avoidance of doubt, the provisions of other laws to the
contrary notwithstanding, the court shall have the power to approve or implement the Rehabilitation Plan despite the lack
of approval, or objection from the owners, partners or stockholders of the insolvent debtor: Provided, That the terms
thereof are necessary to restore the financial well-being and viability of the insolvent debtor.
Section 69.Effect of Confirmation of the Rehabilitation Plan, - The confirmation of the Rehabilitation Plan by the court
shall result in the following:
(a) The Rehabilitation Plan and its provisions shall be binding upon the debtor and all persons who may be
affected by . it, including the creditors, whether or not such persons have participated in the proceedings or opposed the
Rehabilitation Plan or whether or not their claims have been scheduled;
(b) The debtor shall comply with the provisions of the Rehabilitation 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 Rehabilitation 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 Rehabilitation Plan;
(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 implement; and
(f) Claims arising after approval of the Plan that are otherwise not treated by the Plan are not subject to any
Suspension Order.

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The Order confirming the Plan shall comply with Rules 36 of the Rules of Court: Provided, however, That the court may
maintain jurisdiction over the case in order to resolve claims against the debtor that remain contested and allegations
that the debtor has breached the Plan.
Section 70. Liability of General Partners of a Partnership for Unpaid Balances Under an Approved Plan. - The approval of
the Plan shall not affect the rights of creditors to pursue actions against the general partners of a partnership to the
extent they are liable under relevant legislation for the debts thereof.
Section 71. Treatment of Amounts of Indebtedness or Obligations Forgiven or Reduced. - Amounts of any indebtedness
or obligations reduced or forgiven in connection with a Plan's approval shall not be subject to any tax in furtherance of
the purposes of this Act.
Section 72. Period for Confirmation of the Rehabilitation Plan. - The court shall have a maximum period of one (1) year
from the date of the filing of the petition to confirm a Rehabilitation Plan. If no Rehabilitation Plan is confirmed within the
said period, the proceedings may upon motion or motu propio, be converted into one for the liquidation of the debtor .
Section 73. Accounting Discharge of Rehabilitation Receiver. - Upon the 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.
(j) Termination of Proceedings
Section 74. Termination of Proceedings. - The rehabilitation proceedings under Chapter II shall, upon motion by any
stakeholder or the rehabilitation receiver be terminated by order of the court 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
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.
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 a liquidation;
(2) Issue an order converting the proceedings to a 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
Section 75. Effects of Termination. - Termination of the proceedings shall result in the following:

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(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 as provided in
Section 92 of this Act.
CHAPTER III PRE-NEGOTIATED REHABILITATION
Section 76. Petition by Debtor. - An insolvent debtor, by itself or jointly with any of its creditors, may file a verified
petition with the court for the approval of a pre-negotiated Rehabilitation Plan which has been endorsed or approved by
creditors holding at least two-thirds (2/3) of the total liabilities of the debtor, including secured creditors holding more
than fifty percent (50%) 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. The petition shall include as a minimum:
(a) a schedule of the debtor's debts and liabilities;

(b) an inventory of the debtor's assets;
(c) the pre-negotiated Rehabilitation Plan, including the names of at least three (3) qualified nominees for
rehabilitation receiver; and
(d) a summary of disputed claims against the debtor and a report on the provisioning of funds to account for
appropriate payments should any such claims be ruled valid or their amounts adjusted.
Section 77. Issuance of Order. - Within five (5) working days, and after determination that the petition is sufficient in
form and substance, the court shall issue an Order which shall;
(a) identify the debtor, its principal business of activity/ies and its principal place of business;
(b) declare that the debtor is under rehabilitation;
(c) summarize the ground./s for the filling of the petition;
(d) direct the publication of the Order in a newspaper of general circulation in the Philippines 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;
(e) direct the service by personal delivery of a copy of the petition on each creditor who is not a petitioner
holding at least ten percent (10%) of the total liabilities of the debtor, as determined in the schedule attached to the
petition, within three (3) days;
(f) state that copies of the petition and the Rehabilitation Plan are available for examination and copying by any
interested party;
(g) state that creditors and other interested parties opposing the petition or Rehabilitation Plan may file their
objections or comments thereto within a period of not later than twenty (20) days from the second publication of the
Order;
(h) appoint a rehabilitation receiver, if provided for in the Plan; and
(i) include a Suspension or Stay Order as described in this Act.
Section 78. Approval of the Plan. - Within ten (10) days from the date of the second publication of the Order, the court
shall approve the Rehabilitation Plan unless a creditor or other interested party submits an objection to it in accordance
with the next succeeding section.
Section 79. Objection to the 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 not later than eight (8) days from the date of the
second publication of the Order mentioned in Section 77 hereof. The objections shall be limited to the following:

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(a) The allegations in the petition or the Rehabilitation Plan or the attachments thereto are materially false or
misleading;
(b) The majority of any class of creditors do not in fact support the Rehabilitation Plan;
(c) The Rehabilitation Plan fails to accurately account for a claim against the debtor and the claim in not
categorically declared as a contested claim; or
(d) The support of the creditors, or any of them was induced by fraud.
Copies of any objection to the petition of the Rehabilitation Plan shall be served on the debtor, the rehabilitation receiver
(if applicable), the secured creditor with the largest claim and who supports the Rehabilitation Plan, and the unsecured
creditor with the largest claim and who supports the Rehabilitation Plan.
Section 80. Hearing on the Objections. - After receipt of an objection, the court shall set the same for hearing. The date
of the hearing shall be no earlier than twenty (20) days and no later than thirty (30) days from the date of the second
publication of the Order mentioned in Section 77 hereof. If the court finds merit in the objection, it shall direct the debtor,
when feasible to cure the detect within a reasonable period. If the court determines that the debtor or creditors
supporting the Rehabilitation Plan acted in bad faith, or that the objection is non-curable, the court may order the
conversion of the proceedings into liquidation. A finding by the court that the objection has no substantial merit, or that
the same has been cured shall be deemed an approval of the Rehabilitation Plan.
Section 81. Period for Approval of 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.
Section 82. Effect of Approval. - Approval of a Plan under this chapter shall have the same legal effect as confirmation of
a Plan under Chapter II of this Act.
CHAPTER IV
OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS OR REHABILITATION PLANS
Section 83. Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans. - An outof-curt or informal
restructuring agreement or Rehabilitation Plan that meets the minimum requirements prescribed in this chapter is hereby
recognized as consistent with the objectives of this Act.
Section 84. Minimum Requirements of Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans. - For
an out-of-court or informal restructuring/workout agreement or Rehabilitation Plan to qualify under this chapter, it must
meet the following minimum requirements:
(a) The debtor must agree to the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan;
(b) It must be approved by creditors representing at least sixty-seven (67%) of the secured obligations of the
debtor;
(c) It must be approved by creditors representing at least seventy-five percent (75%) of the unsecured
obligations of the debtor; and
(d) It must be approved by creditors holding at least eighty-five percent (85%) of the total liabilities, secured and
unsecured, of the debtor.

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Section 85. Standstill Period. - A standstill period that may be agreed upon by the parties pending negotiation and
finalization of the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan contemplated herein
shall be effective and enforceable not only against the contracting parties but also against the other creditors: Provided,
That (a) such agreement is approved by creditors representing more than fifty percent (50%) of the total liabilities of the
debtor; (b) notice thereof is publishing in a newspaper of general circulation in the Philippines once a week for two (2)
consecutive weeks; and (c) the standstill period does not exceed one hundred twenty (120) days from the date of
effectivity. The notice must invite creditors to participate in the negotiation for out-of-court rehabilitation or restructuring
agreement and notify them that said agreement will be binding on all creditors if the required majority votes prescribed in
Section 84 of this Act are met.
Section 86. Cram Down Effect. - A restructuring/workout agreement or Rehabilitation Plan that is approved pursuant to
an informal workout framework referred to in this chapter shall have the same legal effect as confirmation of a Plan
under Section 69 hereof. The notice of the Rehabilitation Plan or restructuring agreement or Plan shall be published once
a week for at least three (3) consecutive weeks in a newspaper of general circulation in the Philippines. The
Rehabilitation Plan or restructuring agreement shall take effect upon the lapse of fifteen (15) days from the date of the
last publication of the notice thereof.
Section 87. Amendment or Modification. - Any amendment of an out-of-court restructuring/workout agreement or

Rehabilitation Plan must be made in accordance with the terms of the agreement and with due notice on all creditors.
Section 88. Effect of Court Action or Other Proceedings. - Any court action or other proceedings arising from, or relating
to, the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan shall not stay its implementation,
unless the relevant party is able to secure a temporary restraining order or injunctive relief from the Court of Appeals.
Section 89. Court Assistance. - The insolvent debtor and/or creditor may seek court assistance for the execution or
implementation of a Rehabilitation Plan under this Chapter, under such rules of procedure as may be promulgated by the
Supreme Court.
CHAPTER V
LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS
Section 90. Voluntary Liquidation. - An insolvent debtor may apply for liquidation by filing a petition for liquidation with
the court. The petition shall be verified, shall establish the insolvency of the debtor and shall contain, whether as an
attachment or as part of the body of the petition;
(a) a schedule of the debtor's debts and liabilities including a list of creditors with their addresses, amounts of
claims and collaterals, or securities, if any;
(b) an inventory of all its assets including receivables and claims against third parties; and
(c) the names of at least three (3) nominees to the position of liquidator.
At any time during the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the debtor may also
initiate liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to
convert the rehabilitation proceedings into liquidation proceedings. The motion shall be verified, shall contain or set forth
the same matters required in the preceding paragraph, and state that the debtor is seeking immediate dissolution and
termination of its corporate existence.
If the petition or the motion, as the case may be, is sufficient in form and substance, the court shall issue a Liquidation
Order mentioned in Section 112 hereof.

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Section 91. Involuntary Liquidation. - Three (3) or more creditors the aggregate of whose claims is at least either One
million pesos (Php1,000,000,00) or at least twenty-five percent (25%0 of the subscribed capital stock or partner's
contributions of the debtor, whichever is higher, may apply for and seek the liquidation of an insolvent debtor by filing a
petition for liquidation of the debtor with the court. The petition shall show that:
(a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and that the due and demandable
payments thereon have not been made for at least one hundred eighty (180) days or that the debtor has failed generally
to meet its liabilities as they fall due; and
(b) there is no substantial likelihood that the debtor may be rehabilitated.
At any time during the pendency of or after a rehabilitation court-supervised or pre-negotiated rehabilitation proceedings,
three (3) or more creditors whose claims is at least either One million pesos (Php1,000,000.00) or at least twenty-five
percent (25%) of the subscribed capital or partner's contributions of the debtor, whichever is higher, may also initiate
liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert
the rehabilitation proceedings into liquidation proceedings. The motion shall be verified, shall contain or set forth the
same matters required in the preceding paragraph, and state that the movants are seeking the immediate liquidation of
the debtor.
If the petition or motion is sufficient in form and substance, the court shall issue an Order:
(1) directing the publication of the petition or motion in a newspaper of general circulation once a week for two
(2) consecutive weeks; and
(2) directing the debtor and all creditors who are not the petitioners to file their comment on the petition or
motion within fifteen (15) days from the date of last publication.
If, after considering the comments filed, the court determines that the petition or motion is meritorious, it shall issue the
Liquidation Order mentioned in Section 112 hereof.
Section 92. Conversion by the Court into Liquidation Proceedings. - During the pendency of courtsupervised or pre-
negotiated rehabilitation proceedings, the court may order the conversion of rehabilitation proceedings to liquidation
proceedings pursuant to (a) Section 25(c) of this Act; or (b) Section 72 of this Act; or (c) Section 75 of this Act; or (d)
Section 90 of this Act; or at any other time upon the recommendation of the rehabilitation receiver that the rehabilitation
of the debtor is not feasible. Thereupon, the court shall issue the Liquidation Order mentioned in Section 112 hereof.
Section 93. Powers of the Securities and Exchange Commission (SEC). - The provisions of this chapter shall not affect 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.
CHAPTER VI
INSOLVENCY OF INDIVIDUAL DEBTORS
(A) Suspension of Payments.
Section 94. Petition. - An individual debtor who, possessing sufficient property to cover all his debts but foreseeing the
impossibility of meeting them when they respectively fall due, may file a verified petition that he be declared in the state
of suspension of payments by the court of the province or city in which he has resides for six (6) months prior to the
filing of his petition. He shall attach to his petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory
of assess; and (c) a proposed agreement with his creditors.

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Section 95. Action on the Petition. - If the court finds the petition sufficient in form and substance, it shall, within five (5)
working days from the filing of the petition, issue an Order:
(a) calling a meeting of all the creditors named in the schedule of debts and liabilities at such time not less than
fifteen (15) days nor more than forty (40) days from the date of such Order and designating the date, time and place of
the meeting;
(b) directing such creditors to prepare and present written evidence of their claims before the scheduled
creditors' meeting;
(c) directing the publication of the said order in a newspaper of general circulation published in the province or
city in which the petition is filed once a week for two (2) consecutive weeks, with the first publication to be made within
seven (7) days from the time of the issuance of the Order;
(d) directing the clerk of court to cause the sending of a copy of the Order by registered mail, postage prepaid,
to all creditors named in the schedule of debts and liabilities;
(e) forbidding the individual debtor from selling, transferring, encumbering or disposing in any manner of his
property, except those used in the ordinary operations of commerce or of industry in which the petitioning individual
debtor is engaged so long as the proceedings relative to the suspension of payments are pending;
(f) prohibiting the individual debtor from making any payment outside of the necessary or legitimate expenses of
his business or industry, so long as the proceedings relative to the suspension of payments are pending; and
(g) appointing a commissioner to preside over the creditors' meeting.
Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the court may issue an order suspending
any pending execution against the individual debtor. Provide, That properties held as security by secured creditors shall
not be the subject of such suspension order. The suspension order shall lapse when three (3) months shall have passed
without the proposed agreement being accepted by the creditors or as soon as such agreement is denied.
No creditor shall sue or institute proceedings to collect his claim from the debtor from the time of the filing of the petition
for suspension of payments and for as long as proceedings remain pending except:
(a) those creditors having claims for personal labor, maintenance, expense of last illness and funeral of the wife
or children of the debtor incurred in the sixty (60) days immediately prior to the filing of the petition; and
(b) secured creditors.
Section 97. Creditors' Meeting. - The presence of creditors holding claims amounting to at least three-fifths (3/5) of the
liabilities shall be necessary for holding a meeting. The commissioner appointed by the court shall preside over the
meeting and the clerk of court shall act as the secretary thereof, subject to the following rules:
(a) The clerk shall record the creditors present and amount of their respective claims;
(b) The commissioner shall examine the written evidence of the claims. If the creditors present hold at least
three-fifths (3/5) of the liabilities of the individual debtor, the commissioner shall declare the meeting open for business;
(c) The creditors and individual debtor shall discuss the propositions in the proposed agreement and put them to
a vote;
(d) To form a majority, it is necessary:
(1) that two-thirds (2/3) of the creditors voting unite upon the same proposition; and
(2) that the claims represented by said majority vote amount to at least three-fifths (3/5) of the
total liabilities of the debtor mentioned in the petition; and
(e) After the result of the voting has been announced, all protests made against the majority vote shall be drawn
up, and the commissioner and the individual debtor together with all creditors taking part in the voting shall sign the
affirmed propositions.

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No creditor who incurred his credit within ninety (90) days prior to the filing of the petition shall be entitled to vote.
Section 98. Persons Who May Refrain From Voting. - Creditors who are unaffected by the Suspension Order may refrain
from attending the meeting and from voting therein. Such persons shall not be bound by any agreement determined
upon at such meeting, but if they should join in the voting they shall be bound in the same manner as are the other
creditors.
Section 99. Rejection of the Proposed Agreement. - The proposed agreement shall be deemed rejected if the number of
creditors required for holding a meeting do not attend thereat, or if the two (2) majorities mentioned in Section 97 hereof
are not in favor thereof. In such instances, the proceeding shall be terminated without recourse and the parties
concerned shall be at liberty to enforce the rights which may correspond to them.
Section 100. Objections. - If the proposal of the individual debtor, or any amendment thereof made during the creditors'
meeting, is approved by the majority of creditors in accordance with Section 97 hereof, any creditor who attended the
meeting and who dissented from and protested against the vote of the majority may file an objection with the court
within ten (10) days from the date of the last creditors' meeting. The causes for which objection may be made to the
decision made by the majority during the meeting shall be: (a) defects in the call for the meeting, in the holding thereof
and in the deliberations had thereat which prejudice the rights of the creditors; (b) fraudulent connivance between one or
more creditors and the individual debtor to vote in favor of the proposed agreement; or (c) fraudulent conveyance of
claims for the purpose of obtaining a majority. The court shall hear and pass upon such objection as soon as possible and
in a summary manner.
In case the decision of the majority of creditors to approve the individual debtor's proposal or any amendment thereof
made during the creditors' meeting is annulled by the court, the court shall declare the proceedings terminated and the
creditors shall be at liberty to exercise the rights which may correspond to them.
Section 101. Effects of Approval of Proposed Agreement. - If the decision of the majority of the creditors to approve the
proposed agreement or any amendment thereof made during the creditors' meeting is uphold by the court, or when no
opposition or objection to said decision has been presented, the court shall order that the agreement be carried out and
all parties bound thereby to comply with its terms.
The court may also issue all orders which may be necessary or proper to enforce the agreement on motion of any
affected party. The Order confirming the approval of the proposed agreement or any amendment thereof made during
the creditors' meeting shall be binding upon all creditors whose claims are included in the schedule of debts and liabilities
submitted by the individual debtor and who were properly summoned, but not upon: (a) those creditors having claims for
personal labor, maintenance, expenses of last illness and funeral of the wife or children of the debtor incurred in the sixty
(60) days immediately prior to the filing of the petition; and (b) secured creditors who failed to attend the meeting or
refrained from voting therein.
Section 102. Failure of Individual Debtor to Perform Agreement. - If the individual debtor fails, wholly or in part, to
perform the agreement decided upon at the meeting of the creditors, all the rights which the creditors had against the
individual debtor before the agreement shall revest in them. In such case the individual debtor may be made subject to
the insolvency proceedings in the manner established by this Act.
(B) Voluntary Liquidation.
Section 103. Application. - An individual debtor whose properties are not sufficient to cover his liabilities, and owing debts
exceeding Five hundred thousand pesos (Php500,000.00), may apply to be discharged from his debts and liabilities by
filing a verified petition with the court of the province or city in which he has resided for six (6) months prior to the filing
of such petition. He shall attach to his petition a schedule of debts and liabilities and an inventory of assets. The filing of
such petition shall be an act of insolvency.

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Section 104. Liquidation Order. - If the court finds the petition sufficient in form and substance it shall, within five (5)
working days issue the Liquidation Order mentioned in Section 112 hereof.
(C) In voluntary Liquidation
Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors with a claim of, or with claims aggregating
at least Five hundred thousand pesos (Php500, 000.00) may file a verified petition for liquidation with the court of the
province or city in which the individual debtor resides.
The following shall be considered acts of insolvency, and the petition for liquidation shall set forth or allege at least one of
such acts:
(a) That such person is about to depart or has departed from the Republic of the Philippines, with intent to
defraud his creditors;
(b) That being absent from the Republic of the Philippines, with intent to defraud his creditors, he remains absent;
(c) That he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the
liquidation or of defrauding his creditors;
(d) That he conceals, or is removing, any of his property to avoid its being attached or taken on legal process;
(e) That he has suffered his property to remain under attachment or legal process for three (3) days for the
purpose of hindering or delaying the liquidation or of defrauding his creditors; (
(f) That he has confessed or offered to allow judgment in favor of any creditor or claimant for the purpose of
hindering or delaying the liquidation or of defrauding any creditors or claimant;
(g) That he has willfully suffered judgment to be taken against him by default for the purpose of hindering or
delaying the liquidation or of defrauding his creditors;
(h) That he has suffered or procured his property to be taken on legal process with intent to give a preference to
one or more of his creditors and thereby hinder or delay the liquidation or defraud any one of his creditors;
(i) That he has made any assignment, gift, sale, conveyance or transfer of his estate, property, rights or credits
with intent to hinder or delay the liquidation or defraud his creditors;
(j) That he has, in contemplation of insolvency, made any payment, gift, grant, sale, conveyance or transfer of
his estate, property, rights or credits;
(k) That being a merchant or tradesman, he has generally defaulted in the payment of his current obligations for
a period of thirty (30) days;
(l) That for a period of thirty (30) days, he has failed, after demand, to pay any moneys deposited with him or
received by him in a fiduciary; and
(m) That an execution having been issued against him on final judgment for money, he shall have been found to
be without sufficient property subject to execution to satisfy the judgment.
The petitioning creditor/s shall post a bond in such as the court shall direct, conditioned that if the petition for liquidation
is dismissed by the court, or withdrawn by the petitioner, or if the debtor shall not be declared an insolvent the
petitioners will pay to the debtor all costs, expenses, damages occasioned by the proceedings and attorney's fees.
Section 106. Order to Individual Debtor to Show Cause. - Upon the filing of such creditors' petition, the court shall issue
an Order requiring the individual debtor to show cause, at a time and place to be fixed by the said court, why he should
not be adjudged an insolvent. Upon good cause shown, the court may issue an Order forbidding the individual debtor
from making payments of any of his debts, and transferring any property belonging to him. However, nothing contained
herein shall affect or impair the rights of a secured creditor to enforce his lien in accordance with its terms.

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Section 107. Default. - If the individual debtor shall default or if, after trial, the issues are found in favor of the petitioning
creditors the court shall issue the Liquidation Order mentioned in Section 112 hereof.
Section 108. Absent Individual Debtor. - In all cases where the individual debtor resides out of the Republic of the
Philippines; or has departed therefrom; or cannot, after due diligence, be found therein; or conceals himself to avoid
service of the Order to show cause, or any other preliminary process or orders in the matter, then the petitioning
creditors, upon submitting the affidavits requisite to procedure an Order of publication, and presenting a bond in double
the amount of the aggregate sum of their claims against the individual debtor, shall be entitled to an Order of the court
directing the sheriff of the province or city in which the matter is pending to take into his custody a sufficient amount of
property of the individual debtor to satisfy the demands of the petitioning creditors and the costs of the proceedings.
Upon receiving such Order of the court to take into custody of the property of the individual debtor, it shall be the duty of
the sheriff to take possession of the property and effects of the individual debtor, not exempt from execution, to an
extent sufficient to cover the amount provided for and to prepare within three (3) days from the time of taking such
possession, a complete inventory of all the property so taken, and to return it to the court as soon as completed. The
time for taking the inventory and making return thereof may be extended for good cause shown to the court. The sheriff
shall also prepare a schedule of the names and residences of the creditors, and the amount due each, from the books of
the debtor, or from such other papers or data of the individual debtor available as may come to his possession, and shall
file such schedule or list of creditors and inventory with the clerk of court.
Section 109. All Property Taken to be Held for All Creditors; Appeal Bonds; Exemptions to Sureties. - In all cases where
property is taken into custody by the sheriff, if it does not embrace all the property and effects of the debtor not exempt
from execution, any other creditor or creditors of the individual debtor, upon giving bond to be approved by the court in
double the amount of their claims, singly or jointly, shall be entitled to similar orders and to like action, by the sheriff;
until all claims be provided for, if there be sufficient property or effects. All property taken into custody by the sheriff by
virtue of the giving of any such bonds shall be held by him for the benefit of all creditors of the individual debtor whose
claims shall be duly proved as provided in this Act. The bonds provided for in this section and the preceding section to
procure the order for custody of the property and effects of the individual debtor shall be conditioned that if, upon final
hearing of the petition in insolvency, the court shall find in favor of the petitioners, such bonds and all of them shall be
void; if the decision be in favor of the individual debtor, the proceedings shall be dismissed, and the individual debtor, his
heirs, administrators, executors or assigns shall be entitled to recover such sum of money as shall be sufficient to cover
the damages sustained by him, not to exceed the amount of the respective bonds. Such damages shall be fixed and
allowed by the court. If either the petitioners or the debtor shall appeal from the decision of the court, upon final hearing
of the petition, the appellant shall be required to give bond to the successful party in a sum double the amount of the
value of the property in controversy, and for the costs of the proceedings.
Any person interested in the estate may take exception to the sufficiency of the sureties on such bond or bonds. When
excepted to the petitioner's sureties, upon notice to the person excepting of not less than two (2) nor more than five (5)
days, must justify as to their sufficiency; and upon failure to justify, or of others in their place fail to justify at the time
and place appointed the judge shall issue an Order vacating the order to take the property of the individual debtor into
the custody of the sheriff, or denying the appeal, as the case may be.
Section 110. Sale Under Execution. - If, in any case, proper affidavits and bonds are presented to the court or a judge
thereof, asking for and obtaining an Order of publication and an Order for the custody of the property of the individual
debtor and thereafter the petitioners shall make it appear satisfactorily to the court or a judge thereof that the interest of
the parties to the proceedings will be subserved by a sale thereof, the court may order such property to be sold in the
same manner as property is sold under execution, the proceeds to de deposited in the court to abide by the result of the
proceedings.

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CHAPTER VII
PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF INDIVIDUAL AND JURIDICAL DEBTORS
Section 111. Use of Term Debtor. - For purposes of this chapter, the term debtor shall include both individual debtor as
defined in Section 4(o) and debtor as defined in Section 4(k) of this Act.
(A) The Liquidation Order.
Section 112. Liquidation Order. - The Liquidation Order shall:

(a) declare the debtor insolvent;
(b) order the liquidation of the debtor and, in the case of a juridical debtor, declare it as dissolved;
(c) order the sheriff to take possession and control of all the property of the debtor, except those that may be
exempt from execution;
(d) order the publication of the petition or motion in a newspaper of general circulation once a week for two (2)
consecutive weeks;
(e) direct payments of any claims and conveyance of any property due the debtor to the liquidator;
(f) prohibit payments by the debtor and the transfer of any property by the debtor;
(g) direct all creditors to file their claims with the liquidator within the period set by the rules of procedure;
(h) authorize the payment of administrative expenses as they become due;
(i) state that the debtor and creditors who are not petitioner/s may submit the names of other nominees to the
position of liquidator; and
(j) set the case for hearing for the election and appointment of the liquidator, which date shall not be less than
thirty (30) days nor more than forty-five (45) days from the date of the last publication.
Section 113. Effects of the Liquidation Order. - Upon the issuance of the Liquidation Order:
(a) the juridical debtor shall be deemed dissolved and its corporate or juridical existence terminated;
(b) legal title to and control of all the assets of the debtor, except those that may be exempt from execution,
shall be deemed vested in the liquidator or, pending his election or appointment, with the court;
(c) all contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator, within ninety
(90) days from the date of his assumption of office, declares otherwise and the contracting party agrees; (
(d) no separate action for the collection of an unsecured claim shall be allowed. Such actions already pending will
be transferred to the Liquidator for him to accept and settle or contest. If the liquidator contests or disputes the claim,
the court shall allow, hear and resolve such contest except when the case is already on appeal. In such a case, the suit
may proceed to judgment, and any final and executor judgment therein for a claim against the debtor shall be filed and
allowed in court; and
(e) no foreclosure proceeding shall be allowed for a period of one hundred eighty (180) days.
Section 114. Rights of Secured Creditors. - The Liquidation Order shall not affect the right of a secured creditor to enforce
his lien in accordance with the applicable contract or law. A secured creditor may:
(a) waive his right under the security or lien, prove his claim in the liquidation proceedings and share in
the distribution of the assets of the debtor; or
(b) maintain his rights under the security or lien:
If the secured creditor maintains his rights under the security or lien:
(1) the value of the property may be fixed in a manner agreed upon by the creditor and the liquidator. When the
value of the property is less than the claim it secures, the liquidator may convey the property to the secured creditor and
the latter will be admitted in the liquidation proceedings as a creditor for the balance. If its value exceeds the claim
secured, the liquidator may convey the property to the creditor and waive the debtor's right of redemption upon receiving
the excess from the creditor;
(2) the liquidator may sell the property and satisfy the secured creditor's entire claim from the proceeds of the
sale; or

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(3) the secure creditor may enforce the lien or foreclose on the property pursuant to applicable laws.
(B) The Liquidator.
Section 115. Election of Liquidator. - Only creditors who have filed their claims within the period set by the court, and
whose claims are not barred by the statute of limitations, will be allowed to vote in the election of the liquidator. A
secured creditor will not be allowed to vote, unless: (a) he waives his security or lien; or (b) has the value of the property
subject of his security or lien fixed by agreement with the liquidator, and is admitted for the balance of his claim.
The creditors entitled to vote will elect the liquidator in open court. The nominee receiving the highest number of votes
cast in terms of amount of claims, ad who is qualified pursuant to Section 118 hereof, shall be appointed as the liquidator.
Section 116. Court-Appointed Liquidator. - The court may appoint the liquidator if:
(a) on the date set for the election of the liquidator, the creditors do not attend;
(b) the creditors who attend, fail or refuse to elect a liquidator;
(c) after being elected, the liquidator fails to qualify; or
(d) a vacancy occurs for any reason whatsoever, In any of the cases provided herein, the court may instead set
another hearing of the election of the liquidator.
Provided further, That nothing in this section shall be construed to prevent a rehabilitation receiver, who was
administering the debtor prior to the commencement of the liquidation, from being appointed as a liquidator.
Section 117. Oath and Bond of the Liquidator. -Prior to entering upon his powers, duties and responsibilities, the
liquidator shall take an oath and file a bond, In such amount to be fixed by the court, conditioned upon the proper and
faithful discharge of his powers, duties and responsibilities.
Section 118. Qualifications of the Liquidator. - The liquidator shall have the qualifications enumerated in Section 29
hereof. He may be removed at any time by the court for cause, either motu propio or upon motion of any creditor
entitled to vote for the election of the liquidator.
Section 119. Powers, Duties and Responsibilities of the Liquidator. - The liquidator shall be deemed an officer of the court
with the principal duly of preserving and maximizing the value and recovering the assets of the debtor, with the end of
liquidating them and discharging to the extent possible all the claims against the debtor. The powers, duties and
responsibilities of the liquidator shall include, but not limited to:
(a) to sue and recover all the assets, debts and claims, belonging or due to the debtor;
(b) to take possession of all the property of the debtor except property exempt by law from execution;
(c) to sell, with the approval of the court, any property of the debtor which has come into his possession or
control;
(d) to redeem all mortgages and pledges, and so satisfy any judgement which may be an encumbrance on any
property sold by him;
(e) to settle all accounts between the debtor and his creditors, subject to the approval of the court;
(f) to recover any property or its value, fraudulently conveyed by the debtor;
(g) to recommend to the court the creation of a creditors' committee which will assist him in the discharge of the
functions and which shall have powers as the court deems just, reasonable and necessary; and
(h) upon approval of the court, to engage such professional as may be necessary and reasonable to assist him in
the discharge of his duties.

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In addition to the rights and duties of a rehabilitation receiver, the liquidator, shall have the right and duty to take all
reasonable steps to manage and dispose of the debtor's assets with a view towards maximizing the proceedings
therefrom, to pay creditors and stockholders, and to terminate the debtor's legal existence. Other duties of the liquidator
in accordance with this section may be established by procedural rules.
A liquidator shall be subject to removal pursuant to procedures for removing a rehabilitation receiver.
Section 120. Compensation of the Liquidator. - The liquidator and the persons and entities engaged or employed by him
to assist in the discharge of his powers and duties shall be entitled to such reasonable compensation as may determined
by the liquidation court, which shall not exceed the maximum amount as may be prescribed by the Supreme Court.
Section 121. Reporting Requiremen5ts. - The liquidator shall make and keep a record of all moneys received and all
disbursements mad by him or under his authority as liquidator. He shall render a quarterly report thereof to the court ,
which report shall be made available to all interested parties. The liquidator shall also submit such reports as may be
required by the court from time to time as well as a final report at the end of the liquidation proceedings.
Section 122. Discharge of Liquidator. - In preparation for the final settlement of all the claims against the debtor , the
liquidator will notify all the creditors, either by publication in a newspaper of general circulation or such other mode as
the court may direct or allow, that will apply with the court for the settlement of his account and his discharge from
liability as liquidator. The liquidator will file a final accounting with the court, with proof of notice to all creditors. The
accounting will be set for hearing. If the court finds the same in order, the court will discharge the liquidator.
(C) Determination of Claims
Section 123. Registry of Claims. - Within twenty (20) days from his assumption into office the liquidator shall prepare a
preliminary registry of claims of secured and unsecured creditors. Secured creditors who have waived their security or
lien, or have fixed the value of the property subject of their security or lien by agreement with the liquidator and is
admitted as a creditor for the balance , shall be considered as unsecured creditors. The liquidator shall make the registry
available for public inspection and provide publication notice to creditors, individual debtors owner/s of the sole
proprietorship-debtor, the partners of the partnership-debtor and shareholders or members of the corporation-debtor, on
where and when they may inspect it. All claims must be duly proven before being paid.
Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor and creditor of each other one debt shall be
set off against the other, and only the balance, if any shall be allowed in the liquidation proceedings.
Section 125. - Opposition or Challenge to Claims. - Within thirty (30 ) days from the expiration of the period for filing of
applications for recognition of claims, creditors, individual debtors, owner/s of the sole proprietorship-debtor, partners of
the partnership-debtor and shareholders or members of the corporation -debtor and other interested parties may submit
a challenge to claim or claims to the court, serving a certified copy on the liquidator and the creditor holding the
challenged claim. Upon the expiration of the (30) day period, the rehabilitation receiver shall submit to the court the
registry of claims containing the undisputed claims that have not been subject to challenge. Such claims shall become
final upon the filling of the register and may be subsequently set aside only on grounds or fraud, accident, mistake or
inexcusable neglect.
Section 126. Submission of Disputed to the Court. - The liquidator shall resolve disputed claims and submit his findings
thereon to the court for final approval. The liquidator may disallow claims.

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(D) Avoidance Proceedings.
Section 127. Rescission or Nullity of Certain Transactions. - Any transaction occurring prior to the issuance of the
Liquidation Order or, in case of the conversion of the rehabilitation proceedings prior to the commencement date, entered
into by the debtor or involving its assets, may be rescinded or declared null and void on the ground that the same was
executed with intent to defraud a creditor or creditors or which constitute undue preference of creditors. The
presumptions set forth in Section 58 hereof shall apply.
Section 128. Actions for Rescission or Nullity. - (a) The liquidator or, with his conformity, a creditor may initiate and
prosecute any action to rescind, or declare null and void any transaction described in the immediately preceding
paragraph. If the liquidator does not consent to the filling or prosecution of such action, any creditor may seek leave of
the court to commence said action.
(b) if leave of court is granted under subsection (a) hereof, the liquidator shall assign and transfer to the creditor
all rights, title and interest in the chose in action or subject matter of the proceeding, including any document in support
thereof.
(c) Any benefit derived from a proceeding taken pursuant to subsection (a) hereof, to the extent of his claim and
the costs, belongs exclusively to the creditor instituting the proceeding, and the surplus, if any, belongs to the estate.
(d) Where, before an orders is made under subsection (a) hereof, the liquidator signifies to the court his
readiness to the institute the proceeding for the benefit of the creditors, the order shall fix the time within which he shall
do so and, in that case the benefit derived from the proceedings, if instituted within the time limits so fixed, belongs to
the estate.
(E) The Liquidation Plan.
Section 129. The Liquidation Plan. - Within three (3) months from his assumption into office, the Liquidator shall submit a
Liquidation Plan to the court. The Liquidation Plan shall, as a minimum enumerate all the assets of the debtor and a
schedule of liquidation of the assets and payment of the claims.
Section 130. Exempt Property to be Set Apart. - It shall be the duty of the court, upon petition and after hearing, to
exempt and set apart, for the use and benefit of the said insolvent, such real and personal property as is by law exempt
from execution, and also a homestead; but no such petition shall be heard as aforesaid until it is first proved that notice
of the hearing of the application therefor has been duly given by the clerk, by causing such notice to be posted it at least
three (3) public places in the province or city at least ten (10) days prior to the time of such hearing, which notice shall
set forth the name of the said insolvent debtor, and the time and place appointed for the hearing of such application, and
shall briefly indicate the homestead sought to be exempted or the property sought to be set aside; and the decree must
show that such proof was made to the satisfaction of the court, and shall be conclusive evidence of that fact.
Section 131. Sale of Assets in Liquidation. - The liquidator may sell the unencumbered assets of the debtor and convert
the same into money. The sale shall be made at public auction. However, a private sale may be allowed with the
approval of the court if; (a) the goods to be sold are of a perishable nature, or are liable to quickly deteriorate in value,
or are disproportionately expensive to keep or maintain; or (b) the private sale is for the best interest of the debtor and
his creditors. With the approval of the court, unencumbered property of the debtor may also be conveyed to a creditor in
satisfaction of his claim or part thereof.
Section 132. manner of Implementing the Liquidation Plan. - The Liquidator shall implement the Liquidation Plan as
approved by the court. Payments shall be made to the creditors only in accordance with the provisions of the Plan.

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Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and its Implementation shall ensure that the
concurrence and preference of credits as enumerated in the Civil Code of the Philippines and other relevant laws shall be
observed, unless a preferred creditor voluntarily waives his preferred right. For purposes of this chapter, credits for
services rendered by employees or laborers to the debtor shall enjoy first preference under Article 2244 of the Civil Code,
unless the claims constitute legal liens under Article 2241 and 2242 thereof.
Section 134. Order Removing the Debtor from the List of Registered Entitles at the Securities and Exchange Commission.
- Upon determining that the liquidation has been completed according to this Act and applicable law, the court shall issue
an Order approving the report and ordering the SEC to remove the debtor from the registry of legal entities.
Section 135. Termination of Proceedings. - Upon receipt of evidence showing that the debtor has been removed from the
registry of legal entities at the SEC. The court shall issue an Order terminating the proceedings.
Liquidation of a Securities Market Participant.
Section 136. Liquidation of a Securities Market Participant. - The foregoing provisions of this chapter shall be without
prejudice to the power of a regulatory agency or self- regulatory organization to liquidate trade-related claims of clients
or customers of a securities market participant which, for purposes of investor protection, are hereby deemed to have
absolute priority over other claims of whatever nature or kind insofar as trade-related assets are concerned.
For purposes of this section, trade -related assets include cash, securities, trading right and other owned and used by the
securities market participant in the ordinary course of this business.
CHAPTER VIII
PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR REHABILITAION PROCEEDINGS
(A) Banks and Other Financial Institutions Under Rehabilitation Receivership Pursuant to a State-funded
or State-mandated Insurance System.
Section 137. Provision of Assistance. - The court shall issue orders, adjudicate claims and provide other relief necessary
to assist in the liquidation of a financial under rehabilitation receivership established by a state-funded or state-mandated
insurance system.
Section 138. Application of Relevant Legislation. - The liquidation of bank, financial institutions, insurance companies and
pre-need companies shall be determined by relevant legislation. The provisions in this Act shall apply in a suppletory
manner.
(B) Cross-Border Insolvency Proceedings.
Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. - Subject to the provision of Section 136 hereof
and the rules of procedure that may be adopted by the Supreme Court, the Model Law on Cross-Border Insolvency of the
United Nations Center for International Trade and Development is hereby adopted as part of this Act.
Section 140. Initiation of Proceedings. - The court shall set a hearing in connection with an insolvency or rehabilitation
proceeding taking place in a foreign jurisdiction, upon the submission of a petition by the representative of the foreign
entity that is the subject of the foreign proceeding.
Section 141. Provision of Relief. - The court may issue orders:

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(a) suspending any action to enforce claims against the entity or otherwise seize or foreclose on property of the
foreign entity located in the Philippines;
(b) requiring the surrender property of the foreign entity to the foreign representative; or
(c) providing other necessary relief.
Section 142. Factors in Granting Relief. - In determining whether to grant relief under this subchapter, the court shall
consider;
(a) the protection of creditors in the Philippines and the inconvenience in pursuing their claim in a foreign
proceeding;
(b) the just treatment of all creditors through resort to a unified insolvency or rehabilitation proceedings;
(c) whether other jurisdictions have given recognition to the foreign proceeding;
(d) the extent that the foreign proceeding recognizes the rights of creditors and other interested parties in a
manner substantially in accordance with the manner prescribed in this Act; and
(e) the extent that the foreign proceeding has recognized and shown deference to proceedings under this Act
and previous legislation.
CHAPTER IX
FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS
Section 143. Funds for Rehabilitation of Government -owned and Controlled Corporations. - Public funds for the
rehabilitation of government-owned and controlled corporations shall be released only pursuant to an appropriation by
Congress and shall be supported by funds actually available as certified by the National Treasurer.
The Department of Finance, in collaboration with the Department of Budget and Management, shall promulgate the rules
for the use and release of said funds.
CHAPTER X
MISCELLANEOUS PROVISIOS
Section 144. Applicability of Provisions. - The provisions in Chapter II, insofar as they are applicable, shall likewise apply
to proceedings in Chapters II and IV. Section 145. Penalties. - An owner, partner, director, officer or other employee of
the debtor who commits any one of the following acts shall, upon conviction thereof, be punished by a fine of not more
than One million pesos (Php 1, 000,000.00) and imprisonment for not less than three(3) months nor more than five (5)
years for each offense;
(a) if he shall, having notice of the commencement of the proceedings, or having reason to believe that
proceedings are about to be commented, or in contemplation of the proceedings hide or conceal, or destroy or cause to
be destroyed or hidden any property belonging to the debtor or if he shall hide, destroy, after mutilate or falsify, or cause
to be hidden, destroyed, altered, mutilated or falsified, any book, deed, document or writing relating thereto; if he shall,
with intent to defraud the creditors of the debtor, make any payment sale, assignment, transfer or conveyance of any
property belongings to the debtor
(b) if he shall, having knowledge belief of any person having proved a false or fictitious claim against the debtor,
fail to disclose the same to the rehabilitation receiver of liquidator within one (1) month after coming to said knowledge
or belief; or if he shall attempt to account for any of the debtors property by fictitious losses or expense; or
(c) if he shall knowingly violate a prohibition or knowingly fail to undertake an obligation established by this Act.
Section 146. Application to Pending Insolvency, Suspension of Payments and Rehabilitation Cases. - This Act shall govern
all petitions filed after it has taken effect. All further proceedings in insolvency, suspension of payments and rehabilitation
cases then pending, except to the extent that in opinion of the court their application would not be feasible or would
work injustice, in which event the procedures set forth in prior laws and regulations shall apply.

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Section 147. Application to Pending Contracts. - This Act shall apply to all contracts of the debtor regardless of the date
of perfection.
Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As amended is hereby repealed. All other laws,
orders, rules and regulations or parts thereof inconsistent with any provision of this Act are hereby repealed or modified
accordingly.
Section 149. Separability Clause. - If any provision of this Act shall be held invalid, the remainder of this Act not
otherwise affected shall remain in full force effect
Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete publication in the Official
Gazette or in at least two (2) national newspaper of general circulation.
Approved,
(Sgd.) JUAN PONCE ENRILE (Sgd.) PROSPERO C. NOGRALES

President of the Senate Speaker of the House of Representatives
This Act which is a consolidation of House Bill No. 7090 and Senate Bill No. 61 was finally passed by the House of
Representatives and the Senate on February 1. 2010 and February 2, 2010, respectively.
(Sgd.) EMMA LIRIO-REYES (Sgd.) MARILYN B. BARUA-YAP

Secretary of Senate Secretary General House of Representatives
(Sgd.) GLORIA MACAPAGAL-ARROYO

President of the Philippines
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SECURITIES REGULATION CODE
REPUBLIC ACT NO. 8799 THE SECURITIES REGULATION CODE

Be it enacted by the Senate and the House of Representative of the Philippines in the Congress assembled:
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.

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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, asset-backed 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.

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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 it’s 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;

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(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 Commission’s jurisdiction over all cases enumerated under section 5 of Presidential Decree No. 902-A is hereby
transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme
Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over
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.

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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.

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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 owner’s account, such sale or offer for sale or offer for sale, subscription or
delivery not being made in the course of repeated and successive transaction of a like character by such owner, or on his
account by such representative and such owner or representative not being the underwriter of such security.
(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) Broker’s transaction, executed upon customer’s 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.

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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 issuer’s executive officer, its principal operating officer, its
principal financial officer, its comptroller, its principal accounting officer, its corporate secretary, or persons performing
similar functions accompanied by a duly verified resolution of the board of directors of the issuer corporation. The written
consent of the expert named as having certified any part of the registration statement or any document used in
connection therewith shall also be filed. Where the registration statement shares to be sold by selling shareholders, a
written certification by such selling shareholders as to the accuracy of any part of the registration statement contributed
to by such selling shareholders shall be filed.
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.

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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.

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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.

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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 preneed 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 issuer’s 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.

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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.
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(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:

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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.

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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.

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Section 27. Insider’s 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 insider’s spouse or relatives by affinity or
consanguinity within the second degree, legitimate or common-law, shall be presumed to have been effected while in
possession of material nonpublic information if transacted after such information came into existence but prior to
dissemination of such information to the public and the lapse of a reasonable time for market to absorb such information:
Provided, however, That this presumption shall be rebutted upon a showing by the purchaser or seller that he was aware
of the material nonpublic information at the time of the purchase or sale.
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.

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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;

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(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 broker’s, dealers,
associated person’s or salesman’s 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 broker’s or dealer’s 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.

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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-the-Counter 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 selfregulatory 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 firm’s
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.
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(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 exchange’s 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 Commission’s 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.

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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.

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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.

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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.

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(c) 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 selfregulatory 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 selfregulatory 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;

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(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 self-regulatory 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 self-regulatory 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.

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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
selfregulatory 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
agency’s rules;
(b) The organizational charts of the Exchange, its rules of procedure, and list of its officers and participants;
(c) (Copies of the clearing agency’s 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 agency’s 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;

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(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.

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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 agency’s rules. 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 46. Issuer’s 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 person’s 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 agency’s 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

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(b) (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 seventy-five 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 percentage 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
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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.
51.4. 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.

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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 ex-parte 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.
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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
Commission’s 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.

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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.

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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 Pre-need 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.

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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 attorney’s 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.

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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.

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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 self-executory. 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.

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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.

Module 1
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
(Sgd.)JOSEPH E. ESTRADA
President of the Philippines
Look, you’re almost done, let’s do the assessment!
Activity 1-3
REQUIREMENT PAPER ON FINANCIAL REHABILITATION and INSOVENCY ACT INSTRUCTIONS
1. This Questionnaire contains THIRTY-ONE (31) Questions to be answered The questions are equivalent to not less
than 100 POINTS.
2. Read each question very carefully and WRITE your answers in your answer sheet in the same order the questions are
posed. Write your answers only on the front, not the back, page of every sheet. In your answers, use the numbering
system in the questionnaire.
3. Answer questions legibly, clearly, and concisely. Answers that are not readable will not be given any credit.
4. Use BLACK INK PEN ONLY.

Module 1
QUESTIONS:
1) What are the policy of the law?

2) What is the nature of proceeding under the law?
3) Who are the covered person under the law?
4) What kind of Insolvency is covered by the law?
5) Who are excluded from the term debtor under the law?
6) Differentiate the different types of Rehabilitation Proceedings base on: a) who may initiate; b) how initiated; and c)
contents of petition.
7) What are the minimum requirements of Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans?
8) Explain Stand Still period and enumerate its requirement.
9) Within what period and for what reason may a court issue a Commencement Order.
10) What is the content of a Commencement Order? What are its contents?
11) What is the effect of the issuance of a Commencement Order? What are the exceptions if there are any?
12) When is the effectivity and durations of the Commencement Order?
13) What are the minimum requirements to determine whether there is substantial likelihood for the debtor to be
successfully rehabilitated?
14) What is the effect of creditor’s failure to file Notice of Claim?
15) What is the effect of the issuance of the Commencement Order and the Suspension or Stay Order to the secured
creditor’s right?
16) Who is a Rehabilitation Receiver?
17) What are the qualifications of a Rehabilitation Receiver?
18) What are the powers, duties, and responsibilities of a Rehabilitation Receiver?
19) How is a Rehabilitation Receiver removed from office? What are the causes for removal?
20) What are the roles of a Management Committee?
21) ) How is a Management Committee appointed and for what reason?
22) What is consider “conflict of interest” under the law?
23) What is a Rehabilitation Plan? What are its contents?
24) When may a Rehabilitation Plan be confirmed?
25) What are the effects of confirmation and non-confirmation of a Rehabilitation Plan?
26) Explain and discuss “Cram Down Effect”.
27) Differentiate the different kind of Liquidation, as to: a) who may file; b) content of petition; and c) conversion of
Rehabilitation proceedings to Liquidation proceedings.
28) Differentiate Suspension of Payment (sec.94), Voluntary Liquidation (sec.103), and Involuntary Liquidation (sec.105),
as to: a) who may file; b) how to initiate; and c) content of petition.
29) What are the contents of a Liquidation Order?
30) What are the effects of a Liquidation Order? 31) What are the powers, duties, and responsibilities of the liquidator? -
CARPE DIEM -
Quiz 1-3
REQUIREMENT PAPER ON SECURITIES REGULATION CODE (SRC) INSTRUCTIONS
1. This Questionnaire contains THIRTY-ONE (31) Questions to be answered The questions are equivalent to not less
than 100 POINTS.
2. Read each question very carefully and WRITE your answers in your answer sheet in the same order the questions are
posed. Write your answers only on the front, not the back, page of every sheet. In your answers, use the numbering
system in the questionnaire.
3. Answer questions legibly, clearly, and concisely. Answers that are not readable will not be given any credit.
4. Use BLACK INK PEN ONLY.

Module 1
QUESTIONS:
1) What is the nature of the Securities Regulation Code (SRC)?
2) What is the state policy with regards to the SRC?
3) What are the power and functions of the Commission under the SRC?
4) What are securities?
5) What is registration with regards to securities?
6) Why is registration of securities mandated?
7) What is the rule with regard to registration of securities?
8) What are the effects of non-registration?
9) What are the exempt securities?
10) What are the exempt transactions?
11) What is the procedure for registration of securities?
12) What are the grounds for rejection and revocation of registration?
13) What are the grounds for suspension or cancellation of certificate of registration?
14) What are the grounds for suspension of registration?
15) Who are the securities market professionals as classified by the SRC?
16) Who is a broker?
17) Who is a dealer?
18) Who is an associated person of a broker or dealer?
19) Who is a salesman?
20) What is the obligation of the broker to his client?
21) Are security market professionals required to be registered?
22) What is margin trading?
23) Who has the burden of compliance with margin requirements?
24) What are considered manipulation of security prices?
25) What is short selling?
26) What are considered fraudulent transactions?
27) What is insider trading?
28) Who is an insider?
29) Who may be an insider?
30) What are the provisions in the SRC intended to protect the investors?
31) What is a tender offer?
32) What is the purpose of tender offer?
33) In what instances is a tender offer required to be made?
34) What may be considered as a public company?
35) What are the unlawful and prohibited acts relating to tender offers?
36) What are the requisites for valid proxy solicitation?
37) What are the rules on proxy solicitation with regard to broker or dealer?
38) When does disclosure begin? Give the reportorial requirements.
39) Who are the persons that may be liable in case of false registration statements?
40) Who are the persons liable with regard to fraud in connection to prospectus, communication, and reports?
41) Who are the persons liable with regard to fraud in connection with security transactions?
42) Who are the persons liable for the manipulations of security prices?
43) Who are the persons liable with regard to insider trading?
44) How are the person enumerated in the previous questions liable?
45) What is the prescriptive period for filling of action? What court has jurisdictions over civil liabilities?
- CARPE DIEM -

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Regulatory Framework and Legal Issues in Business || Module Content ||Prelim|| Module 1-2

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"Financial Rehabilitation and Insolvency Act (FRIA) of 2010".

Now, let’s acquire new knowledge!

REPUBLIC ACT No. 10142

CHAPTER I GENERAL PROVISIONS

Section 4. Definition of Terms. - As used in this Act, the term:

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(r) Involuntary proceedings shall refer to proceedings initiated by creditors.

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(jj) Secured claim shall refer to a claim that is secured by a lien.

(kk) Secured creditor shall refer to a creditor with a secured claim.

(qq) Unsecured creditor shall refer to a creditor with an unsecured claim.

(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.

For purposes of this section:

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CHAPTER II COURT-SUPERVISED REHABILITATION

(A) Initiation Proceedings.

(1) Voluntary Proceedings.

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(B) Action on the Petition and Commencement of Proceedings

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(1) there are sufficient assets with/which to rehabilitate the debtor;

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(a) give due course to the petition upon a finding that:

(b) dismiss the petition upon a finding that:

(1) debtor is not insolvent;

(1) the debtor is insolvent; and

(C) The Rehabilitation Receiver, Management Committee and Creditors' Committee.

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(1) require the rehabilitation receiver to post an additional bond;

(a) he is a creditor, owner, partner or stockholder of the debtor;

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(a) Secured creditors;

(D) Determination of Claims.

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(a) enter into credit arrangements; or

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(G) Avoidance Proceedings.

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(H) Treatment of Secured Creditors.

(i) Administration of Proceedings.

Section 62.Contents of a Rehabilitation Plan. – The Rehabilitation Plan shall, as a minimum:

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(a) The creditors' support was induced by fraud;

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(j) Termination of Proceedings

There is failure of rehabilitation in the following cases: