REPUBLIC ACT (R.A.) NO.

11057

AN ACT STRENGTHENING THE SECURED TRANSACTIONS LEGAL FRAMEWORK

IN THE PHILIPPINES, WHICH SHALL PROVIDE FOR THE CREATION,
PERFECTION, DETERMINATION OF PRIORITY, ESTABLISHMENT OF A
CENTRALIZED NOTICE REGISTRY, AND ENFORCEMENT OF SECURITY
INTERESTS IN PERSONAL PROPERTY, AND FOR OTHER PURPOSES

otherwise known as the “Personal Property Security Act”

I. Background

Republic Act No. 11057 or the Personal Property Security Act (“PPSA”), was
signed by the President on August 17, 2018 giving micro, small and medium
enterprises (“MSMEs”) improved access to financing from banks and lending
institutions which provides creation, perfection and determination of priority,
establishment and centralized notice registry and enforcement of security
interests in personal property.
II. Scope

Applies to all transactions of any form that secure an obligation with movable
collateral, except interests in aircrafts subject to Republic Act No. 9497, or the
"Civil Aviation Authority Act of 2008," and interests in ships subject to
Presidential Decree No. 1521, or the "Ship Mortgage Decree of 1978”.

III. Effectivity

The law took effect fifteen (15) days after publication or on September 18, 2018
(published in the Official Gazette, Vol. 114, No. 36, p. 6325 on September 3,
2018). Note, however, that notwithstanding the entry into force of RA 11057, the
implementation thereof shall be conditioned upon the Registry in the LRA being
established and operational.
IV. Key features

a) Movable collaterals now include, among other things: deposit accounts,

accounts receivable, negotiable instruments, security certificate or electronic
securities, inventory, equipment, consumer goods, livestock and other
agricultural products, vehicles and even intellectual property rights.

b) The security interest can now include future property, subject however to the
creation of security interest when the borrower acquires rights in it or the
power to encumber it.

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c) Security interest over the personal property may be perfected to bind third
parties through the following means: (i) the registration of a notice with the
Land Registration Authority (LRA); (ii) possession of the collateral by the
secured creditor; and (iii) control of investment property and deposit
accounts.

d) New set of rules for determining priority of security interest which depends
on the nature and kind of property involved and is not entirely dependent on
prior registration.

e) With regard to the foreclosure, a secured creditor may now sell or otherwise
dispose the collateral, publicly or privately.

f) The debtor is now required to satisfy any deficiency after the enforcement of
the collateral.

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V. Major changes
Pledge Mortgage PPSA
1) Formalities as to - delivery of the thing ⁻ delivery is not ⁻ A signed written
creation, perfection, pledged is necessary necessary for its contract is enough
registration and for its validity. validity. to create a security
enforcement interest.

⁻ the agreement must ⁻ registration where ⁻ Perfection of such

be in a public the property is security interest
instrument situated is may be by
containing necessary to bind registration of a
description of the third persons. notice with the
thing pledged and registry, possession
the date thereof to of the collateral by
bind third persons. the secured creditor
or control of
investment
property and
deposit account.

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 Pledge Mortgage PPSA
2) Right of the - the foreclosure of the ⁻ the mortgagor is ⁻ Under the new law, the
lender to pledge completely liable to the secured creditor, shall
recover extinguishes the loan mortgagee if the account to the grantor for
deficiency obligation and any proceeds of the any surplus and, unless
stipulation allowing foreclosure sale otherwise agreed, the
the pledgee to are not enough debtor is liable for any
recover any to satisfy the deficiency.
deficiency is null and loan.
void.

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VI. Laws repealed and amended

1) Laws repealed:

• Sections 1 to 6 of the Chattel Mortgage Law.

• Articles 2085-2123, 2127, 2140-2141, 2243 and 2246-2247 of the Civil

Code of the Philippines.

• Section 13 of the Financing Company Act of 1998.

• Sections 10, 114-116 of the Property Registration Decree.

• Section 5(e) of the Land Transportation and Traffic Code.

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2) Laws amended:

• Section 10 of Presidential Decree No. 1529;

• Article 2127 of the Civil Code of the Philippines;

• Articles 2241, 2243, and 2246-2247 of Civil Code of the Philippines,

insofar as the preferences created by these provisions are inconsistent
with the priority rights of the secured creditor perfected pursuant to these
Rules;.

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Thank You

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