POINTERS FOR REVIEW

Intellectual Property Rights Code R.A. 8293

1. Scope of Intellectual rights in general.

SECTION 1. Title. - This Act shall be known as the “Intellectual Property Code of
the Philippines.”

SECTION 2. Declaration of State Policy. - The State recognizes that an effective

intellectual and industrial property system is vital to the development of domestic
and creative activity, facilitates transfer of technology, attracts foreign
investments, and ensures market access for our products. It shall protect and
secure the exclusive rights of scientists, inventors, artists and other gifted citizens
to their intellectual property and creations, particularly when beneficial to the
people, for such periods as provided in this Act.

The use of intellectual property bears a social function. To this end, the State shall
promote the diffusion of knowledge and information for the promotion of national
development and progress and the common good.

It is also the policy of the State to streamline administrative procedures of

registering patents, trademarks and copyright, to liberalize the registration on the
transfer of technology, and to enhance the enforcement of intellectual property
rights in the Philippines. (n)

SECTION 3. International Conventions and Reciprocity. - Any person who is a

national or who is domiciled or has a real and effective industrial establishment in
a country which is a party to any convention, treaty or agreement relating to
intellectual property rights or the repression of unfair competition, to which the
Philippines is also a party, or extends reciprocal rights to nationals of the
Philippines by law, shall be entitled to benefits to the extent necessary to give
effect to any provision of such convention, treaty or reciprocal law, in addition to
the rights to which any owner of an intellectual property right is otherwise entitled
by this Act. (n)

2. Different between Copyright, Trademarks and Patents.

Trademarks, copyright and patents are different intellectual property rights that cannot be
interchanged with one another. A trademark is any visible sign capable of distinguishing the
goods(trademark) or services(service mark) of an enterprise and shall include a stamped or
marked container of goods. In relation thereto, a trade name means the name or designation
identifying or distinguishing an enterprise. Meanwhile, the scope of a copyright is confined to
literary and artistic works which are original intellectual creations in the literary and artistic
 domain protected from the moment of creation. Patentable inventions, on the other hand, refer
to any technical solution of a problem in any field of human activity which is new, involves an
inventive step and is industrially applicable.(kho. CA, G.R.No. 115758, March 11, 2002).

3. Patentable invention; Non-patentable invention.

Patentable Inventions. — Any technical solution of a problem in any field of human activity which is new,
involves an inventive step and is industrially applicable shall be Patentable. It may be, or may relate to, a
product, or process, or an improvement of any of the foregoing. (Section 21)

Non-Patentable Inventions. — The following shall be excluded from patent protection:

22.1. Discoveries, scientific theories and mathematical methods;

22.2. Schemes, rules and methods of performing mental acts, playing games or doing business, and programs for
computers;
22.3. Methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practiced on
the human or animal body. This provision shall not apply to products and composition for use in any of these
methods;
22.4. Plant varieties or animal breeds or essentially biological process for the production of plants or animals. This
provision shall not apply to micro-organisms and non-biological and microbiological processes.

Provisions under this subsection shall not preclude Congress to consider the enactment of a law providing sui generis
protection of plant varieties and animal breeds and a system of community intellectual rights protection:

22.5. Aesthetic creations; and

22.6. Anything which is contrary to public order or morality. (Section 22).

4. Ownership of a Patent

71.2. Patent owners shall also have the right to assign, or transfer by succession the patent, and to conclude
licensing contracts for the same. (Sec. 37, R.A. No. 165a).

a. Right to a Patent
SECTION 28. Right to a Patent. - The right to a patent belongs to the inventor, his heirs,
or assigns. When two (2) or more persons have jointly made an invention, the right to a
patent shall belong to them jointly. (Sec. 10, R.A. No. 165a).
b. First-to-file rule
SECTION 29. First to File Rule. - If two (2) or more persons have made the invention
separately and independently of each other, the right to the patent shall belong to the
person who filed an application for such invention, or where two or more applications
are filed for the same invention, to the applicant who has the earliest filing date or, the
earliest priority date. (3rd sentence, Sec. 10, R.A. No. 165a).
c. Invention created pursuant to a commission.

SECTION 30. Inventions Created Pursuant to a Commission. - 30.1. The person

who commissions the work shall own the patent, unless otherwise provided in
the contract.

30.2. In case the employee made the invention in the course of his employment
contract, the patent shall belong to:
 (a) The employee, if the inventive activity is not a part of his regular duties even
if the employee uses the time, facilities and materials of the employer.

(b) The employer, if the invention is the result of the performance of his
regularly-assigned duties, unless there is an agreement, express or implied, to
the contrary.

d. Right of priority

SECTION 31. Right of Priority. - An application for patent filed by any person
who has previously applied for the same invention in another country which by
treaty, convention, or law affords similar privileges to Filipino citizens, shall be
considered as filed as of the date of filing the foreign application: Provided,
That: (a) the local application expressly claims priority; (b) it is filed within
twelve (12) months from the date the earliest foreign application was filed; and
(c) a certified copy of the foreign application together with an English
translation is filed within six (6) months from the date of filing in the
Philippines. (Sec. 15, R.A. No. 165a)

5.Limitation of Patent rights.

SECTION 72. Limitations of Patent Rights. - The owner of a patent has no right to
prevent third parties from performing, without his authorization, the acts referred
to in Section 71 hereof in the following circumstances:

72.1. Using a patented product which has been put on the market in the Philippines
by the owner of the product, or with his express consent, insofar as such use is
performed after that product has been so put on the said market: Provided, That,
with regard to drugs and medicines, the limitation on patent rights shall apply after
a drug or medicine has been introduced in the Philippines or anywhere else in the
world by the patent owner, or by any party authorized to use the invention:
Provided, further, That the right to import the drugs and medicines contemplated in
this section shall be available to any government agency or any private third party;

72.2. Where the act is done privately and on a non-commercial scale or for a non-
commercial purpose: Provided, That it does not significantly prejudice the
economic interests of the owner of the patent;
 72.3. Where the act consists of making or using exclusively for experimental use
of the invention for scientific purposes or educational purposes and such other
activities directly related to such scientific or educational experimental use;

72.4. In the case of drugs and medicines, where the act includes testing, using,
making or selling the invention including any data related thereto, solely for
purposes reasonably related to the development and submission of information
and issuance of approvals by government regulatory agencies required under any
law of the Philippines or of another country that regulates the manufacture,
construction, use or sale of any product: Provided, That, in order to protect the
data submitted by the original patent holder from unfair commercial use provided
in Article 39.3 of the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS Agreement), the Intellectual Property Office, in consultation with the
appropriate government agencies, shall issue the appropriate rules and regulations
necessary therein not later than one hundred twenty (120) days after the
enactment of this law;

72.5. Where the act consists of the preparation for individual cases, in a pharmacy
or by a medical professional, of a medicine in accordance with a medical
prescription or acts concerning the medicine so prepared; and

72.6. Where the invention is used in any ship, vessel, aircraft, or land vehicle of any
other country entering the territory of the Philippines temporarily or accidentally:
Provided, That such invention is used exclusively for the needs of the ship, vessel,
aircraft, or land vehicle and not used for the manufacturing of anything to be sold
within the Philippines. (Secs. 38 and 39, R.A. No. 165a)

a. Prior user

SECTION 73. Prior User. - 73.1. Notwithstanding Section 72 hereof, any prior
user, who, in good faith was using the invention or has undertaken serious
preparations to use the invention in his enterprise or business, before the filing
date or priority date of the application on which a patent is granted, shall have
the right to continue the use thereof as envisaged in such preparations within
the territory where the patent produces its effect.

73.2. The right of the prior user may only be transferred or assigned together
with his enterprise or business, or with that part of his enterprise or business in
which the use or preparations for use have been made. (Sec. 40, R.A. No. 165a)

6. Patent Infringement
Patent infringement occurs when another party makes, uses, or sells a patented item
without the permission of the patent holder. The patent holder may choose to sue the
infringing party to stop his or her activities, as well as to receive compensation for the
unauthorized use. Since intellectual property is governed by federal law, the patent
holder must sue the unauthorized party in federal district court.

Patent holders must bring infringement actions within six years from the date of
infringement; if the suit is not brought in this time limit, it is time-barred, ratifying the
infringement. While patent litigation proceeds much like any other federal case, the
complicated legal issues surrounding patent validity and infringement are reserved for
the court's determination, although some patent litigation cases use juries for other
aspects of the overall case.

a. Doctrine of equivalents.

The doctrine of equivalents is a common law concept borne out of American jurisprudence. It is an equitable
measure to protect patentees against deliberate efforts of infringers to evade liability for infringement by
making only insubstantial changes to a patented invention. In other words, it extends protection beyond the
specific and literal claims of patents. In one of its recent decisions, the U.S Supreme Court restated the time-
honored rationale behind the application of the doctrine of equivalents:

7. Licensing

a. Voluntary Licensing

SECTION 85. Voluntary License Contract. - To encourage the transfer and dissemination of technology,
prevent or control practices and conditions that may in particular cases constitute an abuse of
intellectual property rights having an adverse effect on competition and trade, all technology transfer
arrangements shall comply with the provisions of this Chapter.

b.Compulsory Licensing

SECTION 93. Grounds for Compulsory Licensing. - The Director General of the Intellectual Property Office
may grant a license to exploit a patented invention, even without the agreement of the patent owner, in
favor of any person who has shown his capability to exploit the invention, under any of the following
circumstances:

93.1. National emergency or other circumstances of extreme urgency;

93.2. Where the public interest, in particular, national security, nutrition, health or the development of
other vital sectors of the national economy as determined by the appropriate agency of the
Government, so requires; or

93.3. Where a judicial or administrative body has determined that the manner of exploitation by the
owner of the patent or his licensee is anti-competitive; or

93.4. In case of public non-commercial use of the patent by the patentee, without satisfactory reason;
8. Trademarks

SECTION 121. Definitions. - As used in Part III, the following terms have the following meanings:

a. Definition of marks, collective marks, and trademarks

121.1. “Mark” means any visible sign capable of distinguishing the goods (trademark) or services
(service mark) of an enterprise and shall include a stamped or marked container of goods; (Sec.
38, R.A. No. 166a)

121.2. “Collective mark” means any visible sign designated as such in the application for
registration and capable of distinguishing the origin or any other common characteristic,
including the quality of goods or services of different enterprises which use the sign under the
control of the registered owner of the collective mark; (Sec. 40, R.A. No. 166a)

121.3. “Trade name” means the name or designation identifying or distinguishing an enterprise;
(Sec. 38, R.A. No. 166a)

121.4. “Bureau” means the Bureau of Trademarks;

121.5. “Director” means the Director of Trademarks;

121.6. “Regulations” means the Rules of Practice in Trademarks and Service Marks formulated
by the Director of Trademarks and approved by the Director General; and

121.7. “Examiner” means the trademark examiner. (Sec. 38, R.A. No. 166a).
b. Trademark Infringement

Trademark infringement is the unauthorized use in commerce of a registered trademark or a

copy or colorable imitation thereof, which results in the likelihood of confusion among the
consuming public. The elements of trademark infringement are: (1) a registered trademark in
the Philippines, (2) plaintiff’s ownership of said mark, and (3) use of the trademark or imitation
thereof by a third person, which results in likelihood of confusion.
c.Unfair Competition
Unfair competition is a form of copying and making false statements by one who passes off his
own goods for those of another that has an established goodwill. The copying and or passing off
may include copying of the trademark or giving one’s own goods the general appearance of
another, which causes likelihood of confusion. The elements of unfair competition are: (1)
confusing similarity in the appearance of the goods involved, and (2) intent to deceive the public
and defraud a competitor.
d. Registration of marks under madrid protocol
Whereas, the Intellectual Property Office of the Philippines (IPOPHL) Recognizes the need of
trademark holders to have access to a global Infrastructure that would allow them to secure
protection for their marks Through a simple, transparent, and cost-effective manner;
Whereas, the Protocol Relating to the Madrid Agreement Concerning The International
Registration of Marks (“Madrid Protocol”) is an international Procedure that allows
 trademark holders to secure protection in multiple Jurisdictions following a single procedure;
Whereas, as part of the continuing improvements to the trademark System in the Philippines
and the IPOPHL’s thrust to continue to deliver timely And quality services to trademark
owners, the Republic of the Philippines Acceded to the Madrid Protocol and deposited its
instrument of accession with The World Intellectual Property Organization (WIPO) on 25 April
2012;
Whereas, the Madrid Protocol does not amend the laws of the Philippines, including Republic
Act No. 8293 (the Intellectual Property Code of The Philippines or the “IP Code”);
Whereas, to implement the provisions of the Madrid Protocol and to Supplement the
provisions of the IP Code to govern the international Registration of marks filed under the
Madrid Protocol , there is a need for the IPOPHL to promulgate regulations implementing the
Madrid Protocol in the Philippines; Now, therefore, pursuant to the accession of the
Philippines to the Madrid Protocol, the following regulations on the international registration
of Marks under the Madrid Protocol are hereby promulgated.
9. Copyright
SECTION 171. Definitions. - For the purpose of this Act, the following terms have the
following meaning:

171.1. “Author” is the natural person who has created the work;

171.2. A “collective work” is a work which has been created by two (2) or more natural
persons at the initiative and under the direction of another with the understanding that it
will be disclosed by the latter under his own name and that contributing natural persons
will not be identified;

171.3. “Communication to the public” or “communicate to the public” means the making
of a work available to the public by wire or wireless means in such a way that members
of the public may access these works from a place and time individually chosen by
them;

171.4. A “computer” is an electronic or similar device having information-processing

capabilities, and a “computer program” is a set of instructions expressed in words,
codes, schemes or in any other form, which is capable when incorporated in a medium
that the computer can read, of causing the computer to perform or achieve a particular
task or result;

171.5. “Public lending” is the transfer of possession of the original or a copy of a work
or sound recording for a limited period, for non-profit purposes, by an institution the
services of which are available to the public, such as public library or archive;

171.6. “Public performance”, in the case of a work other than an audiovisual work, is the
recitation, playing, dancing, acting or otherwise performing the work, either directly or by
means of any device or process; in the case of an audiovisual work, the showing of its
images in sequence and the making of the sounds accompanying it audible; and, in the
case of a sound recording, making the recorded sounds audible at a place or at places
where persons outside the normal circle of a family and that family’s closest social
acquaintances are or can be present, irrespective of whether they are or can be present
at the same place and at the same time, or at different places and/or at different times,
and where the performance can be perceived without the need for communication
within the meaning of Subsection 171.3;

171.7. “Published works” means works, which, with the consent of the authors, are
made available to the public by wire or wireless means in such a way that members of
the public may access these works from a place and time individually chosen by them:
Provided, That availability of such copies has been such, as to satisfy the reasonable
requirements of the public, having regard to the nature of the work;

171.8. “Rental” is the transfer of the possession of the original or a copy of a work or a
sound recording for a limited period of time, for profit-making purposes;

171.9. “Reproduction” is the making of one (1) or more copies of a work or a sound
recording in any manner or form (Sec. 41 (E), P.D. No. 49 a);

171.10. A “work of applied art” is an artistic creation with utilitarian functions or

incorporated in a useful article, whether made by hand or produced on an industrial
scale;

171.11. A “work of the Government of the Philippines” is a work created by an officer or

employee of the Philippine Government or any of its subdivisions and instrumentalities,
including government-owned or controlled corporations as a part of his regularly
prescribed official duties.

a.1.Original work
SECTION 172. Literary and Artistic Works. - 172.1. Literary and artistic works, hereinafter
referred to as “works”, are original intellectual creations in the literary and artistic domain
protected from the moment of their creation and shall include in particular:

(a) Books, pamphlets, articles and other writings;

(b) Periodicals and newspapers;

© Lectures, sermons, addresses, dissertations prepared for oral delivery, whether or not
reduced in writing or other material form;
 (c) Letters;

€ Dramatic or dramatico-musical compositions; choreographic works or entertainment in

dumb shows;

(f) Musical compositions, with or without words;

(g) Works of drawing, painting, architecture, sculpture, engraving, lithography or other works
of art; models or designs for works of art;

(h) Original ornamental designs or models for articles of manufacture, whether or not
registrable as an industrial design, and other works of applied art;

(i) Illustrations, maps, plans, sketches, charts and three-dimensional works relative to
geography, topography, architecture or science;

(j) Drawings or plastic works of a scientific or technical character;

(k) Photographic works including works produced by a process analogous to photography;

lantern slides;

(l) Audiovisual works and cinematographic works and works produced by a process analogous
to cinematography or any process for making audio-visual recordings;

(m) Pictorial illustrations and advertisements;

(n) Computer programs; and

(o) Other literary, scholarly, scientific and artistic works.

172.2. Works are protected by the sole fact of their creation, irrespective of their mode or
form of expression, as well as of their content, quality and purpose. (Sec. 2, P.D. No. 49a)
b. 2. Derivative works

SECTION 173. Derivative Works. - 173.1. The following derivative works shall also be
protected by copyright:

(a) Dramatizations, translations, adaptations, abridgments, arrangements, and other

alterations of literary or artistic works; and

(b) Collections of literary, scholarly or artistic works, and compilations of data and other
materials which are original by reason of the selection or coordination or arrangement
of their contents. (Sec. 2, (P) and (Q), P.D. No. 49).
b. Non-copyrightable works.

Titles, names, short phrases, slogans

Titles, names, short phrases, and slogans are not protected by copyright law. Similarly, it
is clear that copyright law does not protect simple product lettering or coloring, or the
mere listing of product ingredients or contents. The exclusion of these types of
materials is not an exception to copyright law, but merely an application of the
requirements for copyright protection. To be protected by copyright, a work must
contain at least a minimum amount of authorship in the form of original expression.
Names, titles, and other short phrases are simply too minimal to meet these
requirements. This is why you will often see books and movies sharing the same title.

Of course, brand names, slogans and phrases which are used in connection with a
product or service may be protectable under trademark law (see the BitLaw discussion
on trademarks for more information). In fact, a series of books all under the same title
may even create trademark protection for that title.

c.Limitations on Copyright

Notwithstanding the provisions of Chapter V, the following acts shall not constitute
infringement of copyright (SECTION 184.1):

The recitation or performance of a work, once it has been lawfully made accessible to
the public, if (1)done privately and free of charge or (2)if made strictly for a charitable or
religious institution or society; (Sec. 10(1), P.D. No. 49)

The making of quotations from a published work if they are compatible with fair use and
only to the extent justified for the purpose, including quotations from newspaper articles
and periodicals in the form of press summaries: Provided, That the source and the
name of the author, if appearing on the work, are mentioned; (Sec. 11, third par., P.D. No.
49)

The reproduction or communication to the public by mass media of (1)articles on

current political, social, economic, scientific or religious topic, (2)lectures, addresses
and other works of the same nature, which are delivered in public if such use is for
information purposes and has not been expressly reserved: Provided, That the source is
clearly indicated; (Sec. 11, P.D. No. 49)
The reproduction and communication to the public of literary, scientific or artistic works
as part of reports of current events by means of photography, cinematography or
broadcasting to the extent necessary for the purpose; (Sec. 12, P.D. No. 49)

The inclusion of a work in a publication, broadcast, or other communication to the

public, sound recording or film, if such inclusion is made by way of illustration for
teaching purposes and is compatible with fair use: Provided, That the source and of the
name of the author, if appearing in the work, are mentioned;

The recording made in schools, universities, or educational institutions of a work

included in a broadcast for the use of such schools, universities or educational
institutions: Provided, That such recording must be deleted within a reasonable period
after they were first broadcast: Provided, further, That such recording may not be made
from audiovisual works which are part of the general cinema repertoire of feature films
except for brief excerpts of the work;

The making of ephemeral recordings by a broadcasting organization by means of its

own facilities and for use in its own broadcast;

The use made of a work by or under the direction or control of the Government, by the
National Library or by educational, scientific or professional institutions where such use
is in the public interest and is compatible with fair use;

The public performance or the communication to the public of a work, in a place where
no admission fee is charged in respect of such public performance or communication,
by a club or institution for charitable or educational purpose only, whose aim is not
profit making, subject to such other limitations as may be provided in the Regulations;
(n)

Public display of the original or a copy of the work not made by means of a film, slide,
television image or otherwise on screen or by means of any other device or process:
Provided, That either the work has been published, or, that the original or the copy
displayed has been sold, given away or otherwise transferred to another person by the
author or his successor in title; and

Any use made of a work for the purpose of any judicial proceedings or for the giving of
professional advice by a legal practitioner.

c.Fair use
FAIR USE OF A COPYRIGHTED WORK. The fair use of a copyrighted work for
(1)criticism, comment, (2)news reporting, (3)teaching including multiple copies for
classroom use, (4)scholarship, research, and similar purposes is not an infringement of
copyright. Decompilation, which is understood here to be the reproduction of the code
and translation of the forms of the computer program to achieve the inter-operability of
an independently created computer program with other programs may also constitute
fair use. In determining whether the use made of a work in any particular case is fair
use, the factors to be considered shall include (SECTION 185.1) :

The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;

The nature of the copyrighted work;

The amount and substantiality of the portion used in relation to the copyrighted work as
a whole; and

The effect of the use upon the potential market for or value of the copyrighted work.

185.2. The fact that a work is unpublished shall not by itself bar a finding of fair use if
such finding is made upon consideration of all the above factors.

d.Copyright Infringement

Copyright infringement is the use or production of copyright-protected material without

the permission of the copyright holder. Copyright infringement means that the rights
afforded to the copyright holder, such as the exclusive use of a work for a set period of
time, are being breached by a third party. Music and movies are two of the most well-
known forms of entertainment that suffer from significant amounts of copyright
infringement. Infringement cases may lead to contingent liabilities, which are amounts
set aside in case of a possible lawsuit.

Philippine Competition Act. R.A 10667

1. Definition and Scope of application

Section 1. Short Title. – This Act shall be known as the “Philippine Competition Act”.

Section 2. Declaration of Policy. – The efficiency of market competition as a

mechanism for allocating goods and services is a generally accepted precept. The State
recognizes that past measures undertaken to liberalize key sectors in the economy
need to be reinforced by measures that safeguard competitive conditions. The State
also recognizes that the provision of equal opportunities to all promotes entrepreneurial
spirit, encourages private investments, facilitates technology development and transfer
and enhances resource productivity. Unencumbered market competition also serves the
interest of consumers by allowing them to exercise their right of choice over goods and
services offered in the market.

Pursuant to the constitutional goals for the national economy to attain a more equitable
distribution of opportunities, income, and wealth; a sustained increase in the amount of
goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all, especially the
underprivileged and the constitutional mandate that the State shall regulate or prohibit
monopolies when the public interest so requires and that no combinations in restraint
of trade or unfair competition shall be allowed, the State shall:

(a) Enhance economic efficiency and promote free and fair competition in trade,
industry and all commercial economic activities, as well as establish a National
Competition Policy to be implemented by the Government of the Republic of the
Philippines and all of its political agencies as a whole;

(b) Prevent economic concentration which will control the production, distribution,
trade, or industry that will unduly stifle competition, lessen, manipulate or
constrict the discipline of free markets; and

© Penalize all forms of anti-competitive agreements, abuse of dominant position and

anti-competitive mergers and acquisitions, with the objective of protecting consumer
welfare and advancing domestic and international trade and economic development.

Section 3. Scope and Application. — This Act shall be enforceable against any person or
entity engaged in any trade, industry and commerce in the Republic of the Philippines. It
shall likewise be applicable to international trade having direct, substantial, and
reasonably foreseeable effects in trade, industry, or commerce in the Republic of the
Philippines, including those that result from acts done outside the Republic of the
Philippines.

2. Powers and functions of the Philippines competition commission

Section 5. Philippine Competition Commission. – To implement the national

competition policy and attain the objectives and purposes of this Act, an
independent quasi-judicial body is hereby created, which shall be known as the
 Philippine Competition Commission (PCC), hereinafter referred to as the
Commission, and which shall be organized within sixty (60) days after the
effectivity of this Act. Upon establishment of the Commission, Executive Order
No. 45 designating the Department of Justice as the Competition Authority is
hereby amended. The Office for Competition (OFC) under the Office of the
Secretary of Justice shall however be retained, with its powers and functions
modified pursuant to Section 13 of this Chapter.

The Commission shall be an attached agency to the Office of the President.

3. Prohibited acts

Section 8. Prohibitions and Disqualifications. – The Commissioners shall not, during their
tenure, hold any other office or employment. They shall not, during their tenure, directly or
indirectly practice any profession, except in a teaching capacity, participate in any business,
or be financially interested in any contract with, or any franchise, or special privileges granted
by the government or any subdivision, agency, or instrumentality thereof, including
government-owned and -controlled corporations or their subsidiaries. They shall strictly avoid
conflict of interest in the conduct of their office. They shall not be qualified to run for any
office in the election immediately succeeding their cessation from office: Provided, That the
election mentioned hereof is not a Barangay election or a Sangguniang Kabataan election.
Provided, they shall not be allowed to personally appear or practice as counsel or agent on
any matter pending before the Commission for two (2) years following their cessation from
office.

No spouse or relative by consanguinity or affinity within the fourth civil degree of any of the
Commissioners, the Chairperson and the Executive Director of the Commission may appear
as counsel nor agent on any matter pending before the Commission or transact business
directly or indirectly therein during incumbency and within two (2) years from cessation of
office.

a. Anti-competitive agreements

Section 14. Anti-Competitive Agreements. –

(a) The following agreements, between or among competitors, are per se prohibited:

(1) Restricting competition as to price, or components thereof, or other

terms of trade;

(2) Fixing price at an auction or in any form of bidding including cover

bidding, bid suppression, bid rotation and market allocation and other
analogous practices of bid manipulation;
 (b) The following agreements, between or among competitors which have the object
or effect of substantially preventing, restricting or lessening competition shall be
prohibited:

(1) Setting, Kmiting, or controlling production, markets, technical

development, or investment;

(2) Dividing or sharing the market, whether by volume of sales or

purchases, territory, type of goods or services, buyers or sellers or any
other means;

© Agreements other than those specified in (a) and (b) of this section which have the
object or effect of substantially preventing, restricting or lessening competition shall also
be prohibited: Provided, Those which contribute to improving the production or
distribution of goods and services or to promoting technical or economic progress, while
allowing consumers a fair share of the resulting benefits, may not necessarily be deemed
a violation of this Act.

An entity that controls, is controlled by, or is under common control with another entity or
entities, have common economic interests, and are not otherwise able to decide or act
independently of each other, shall not be considered competitors for purposes of this
section.

b. Abuse of dominant position

Section 15. Abuse of Dominant Position. – It shall be prohibited for one or more entities
to abuse their dominant position by engaging in conduct that would substantially prevent,
restrict or lessen competition:

(a) Selling goods or services below cost with the object of driving competition out of
the relevant market: Provided, That in the Commission’s evaluation of this fact, it
shall consider whether the entity or entities have no such object and the price
established was in good faith to meet or compete with the lower price of a
competitor in the same market selling the same or comparable product or service
of like quality;

(b) Imposing barriers to entry or committing acts that prevent competitors from
growing within the market in an anti-competitive manner except those that
develop in the market as a result of or arising from a superior product or process,
business acumen, or legal rights or laws;

(c) © Making a transaction subject to acceptance by the other parties of other

obligations which, by their nature or according to commercial usage, have no
connection with the transaction;

(d) Setting prices or other terms or conditions that discriminate unreasonably

between customers or sellers of the same goods or services, where such
customers or sellers are contemporaneously trading on similar terms and
 conditions, where the effect may be to lessen competition substantially: Provided,
That the following shall be considered permissible price differentials:

(1) Socialized pricing for the less fortunate sector of the economy;

(2) Price differential which reasonably or approximately reflect differences

in the cost of manufacture, sale, or delivery resulting from differing
methods, technical conditions, or quantities in which the goods or
services are sold or delivered to the buyers or sellers;

(3) Price differential or terms of sale offered in response to the competitive

price of payments, services or changes in the facilities furnished by a
competitor; and

(4) Price changes in response to changing market conditions, marketability

of goods or services, or volume;

(5) € Imposing restrictions on the lease or contract for sale or trade of

goods or services concerning where, to whom, or in what forms goods
or services may be sold or traded, such as fixing prices, giving
preferential discounts or rebate upon such price, or imposing conditions
not to deal with competing entities, where the object or effect of the
restrictions is to prevent, restrict or lessen competition substantially:
Provided, That nothing contained in this Act shall prohibit or render
unlawful:

(1) Permissible franchising, licensing, exclusive merchandising or exclusive

distributorship agreements such as those which give each party the right to
unilaterally terminate the agreement; or

(2) Agreements protecting intellectual property rights, confidential information, or trade

secrets;

(f) Making supply of particular goods or services dependent upon the purchase of other
goods or services from the supplier which have no direct connection with the main goods
or services to be supplied;

(g) Directly or indirectly imposing unfairly low purchase prices for the goods or services
of, among others, marginalized agricultural producers, fisherfolk, micro-, small-, medium-
scale enterprises, and other marginalized service providers and producers;

(h) Directly or indirectly imposing unfair purchase or selling price on their competitors,
customers, suppliers or consumers, provided that prices that develop in the market as a
result of or due to a superior product or process, business acumen or legal rights or laws
shall not be considered unfair prices; and

(i) Limiting production, markets or technical development to the prejudice of

consumers, provided that limitations that develop in the market as a result of or
due to a superior product or process, business acumen or legal rights or laws
shall not be a violation of this Act:
 Provided, That nothing in this Act shall be construed or interpreted as a prohibition on having a
dominant position in a relevant market or on acquiring, maintaining and increasing market share
through legitimate means that do not substantially prevent, restrict or lessen competition:

Provided, further, That any conduct which contributes to improving production or

distribution of goods or services within the relevant market, or promoting technical and
economic progress while allowing consumers a fair share of the resulting benefit may not
necessarily be considered an abuse of dominant position:

Provided, finally, That the foregoing shall not constrain the Commission or the relevant
regulator from pursuing measures that would promote fair competition or more
competition as provided in this Act.

c. Prohibited Mergers and acquisitions

Section 20. Prohibited. Mergers and Acquisitions. – Merger or acquisition

agreements that substantially prevent, restrict or lessen competition in the
relevant market or in the market for goods or services as may be determined
by the Commission shall be prohibited.

d. Exceptions

Section 21. Exemptions from Prohibited. Mergers and Acquisitions. – Merger

or acquisition agreement prohibited under Section 20 of this Chapter may,
nonetheless, be exempt from prohibition by the Commission when the parties
establish either of the following:

(a) The concentration has brought about or is likely to bring about gains in
efficiencies that are greater than the effects of any limitation on
competition that result or likely to result from the merger or acquisition
agreement; or

(b) A party to the merger or acquisition agreement is faced with actual or

imminent financial failure, and the agreement represents the least anti-
competitive arrangement among the known alternative uses for the
failing entity’s assets:

Provided, That an entity shall not be prohibited from continuing to own and
hold the stock or other share capital or assets of another corporation which it
acquired prior to the approval of this Act or acquiring or maintaining its
market share in a relevant market through such means without violating the
provisions of this Act:.
Provided, further, That the acquisition of the stock or other share capital of
one or more corporations solely for investment and not used for voting or
exercising control and not to otherwise bring about, or attempt to bring about
the prevention, restriction, or lessening of competition in the relevant market
shall not be prohibited.

Foreign Investment Act (FIA) of 1991( Rep.Act 7042)

1. Policy of the law

Section 1. Title. – This Act shall be known as the, “Foreign Investments

Act of 1991”.

Section 2. Declaration of Policy. – It is the policy of the State to attract,

promote and welcome productive investments from foreign individuals,
partnerships, corporations, and governments, including their political
subdivisions, in activities which significantly contribute to national
industrialization and socioeconomic development to the extent that
foreign investment is allowed in such activity by the Constitution and
relevant laws. Foreign investments shall be encouraged in enterprises that
significantly expand livelihood and employment opportunities for Filipinos;
enhance economic value of farm products; promote the welfare of Filipino
consumers; expand the scope, quality and volume of exports and their
access to foreign markets; and/or transfer relevant technologies in
agriculture, industry and support services. Foreign investments shall be
welcome as a supplement to Filipino capital and technology in those
enterprises serving mainly the domestic market.

As a general rule, there are no restrictions on extent of foreign ownership

of export enterprises. In domestic market enterprises, foreigners can
invest as much as one hundred percent (100%) equity except in areas
included in the negative list. Foreign owned firms catering mainly to the
domestic market shall be encouraged to undertake measures that will
gradually increase Filipino participation in their businesses by taking in
Filipino partners, electing Filipinos to the board of directors, implementing
transfer of technology to Filipinos, generating more employment for the
economy and enhancing skills of Filipino workers.

2. Definition of terms

Section 3. Definitions. – As used in this Act:

 a) The term “Philippine national” shall mean a citizen of the
Philippines or a domestic partnership or association wholly owned
by citizens of the Philippines; or a corporation organized under the
laws of the Philippines of which at least sixty percent (60%) of the
capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty (60%) of the fund will accrue to
the benefit of the Philippine nationals: Provided, That where a
corporation and its non-Filipino stockholders own stocks in a
Securities and Exchange Commission (SEC) registered enterprise,
at least sixty percent (60%) of the capital stocks outstanding and
entitled to vote of both corporations must be owned and held by
citizens of the Philippines and at least sixty percent (60%) of the
members of the Board of Directors of both corporations must be
citizens of the Philippines, in order that the corporations shall be
considered a Philippine national;

b) The term “investment” shall mean equity participation in any

enterprise organized or existing under the laws of the Philippines;

a.Foreign Investment

c) The term "foreign investment" shall mean as equity investment made by a non-
Philippine national in the form of foreign exchange and/or other assets actually
transferred to the Philippines and duly registered with the Central Bank which shall
assess and appraise the value of such assets other than foreign exchange;

b. “Doing business” in the Philippines

d) The praise “doing business” shall include soliciting orders, service contracts, opening
offices, whether called “liaison” offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year stay in the country
for a period or periods totalling one hundred eighty (180) days or more; participating in
the management, supervision or control of any domestic business, firm, entity or
corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase “doing business: shall not be deemed
to include mere investment as a shareholder by a foreign entity in domestic corporations
duly registered to do business, and/or the exercise of rights as such investor; nor having
a nominee director or officer to represent its interests in such corporation; nor appointing
a representative or distributor domiciled in the Philippines which transacts business in its
own name and for its own account;

c.Export enterprise

e) The term “export enterprise” shall mean an enterprise which produces goods for sale,
or renders services to the domestic market entirely or if exporting a portion of its output
fails to consistently export at least sixty percent (60%) thereof; and

d. Domestic market enterprise foreign Investment Negative list

g) The term “Foreign Investments Negative List” or “Negative List” shall mean a list of
areas of economic activity whose foreign ownership is limited to a maximum of forty
ownership is limited to a maximum of forty percent (40%) of the equity capital of the
enterprise engaged therein.

Financial Rehabilitation and Insolvency Actor 2010 (R.A. 10142) and Concurrence
and preference of credits (Arts. 2241-2244,NCC)

1. Policies of the law

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.

2. Definition of terms

A.Debtor

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.

B. Insolvent

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.

a.1.liabilities

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.

b.2. ordinary course of business

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.

C. Creditor

Creditor shall refer to a natural or juridical person which

has a claim against the debtor that arose on or before the
commencement date.

D. Secured claim

Secured claim shall refer to a claim that is secured by a

lien.

E. Lien

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.

F. Rehabilitation

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.

G. Rehabilitation plan

Rehabilitation Plan shall refer to a plan by which the

financial well-being and viability of an insolvent debtor can
be restored using various means including, but not limited
to, debt forgiveness, debt rescheduling, reorganization or
quasi-reorganization, dacion en pago, debt-equity
conversion and sale of the business (or parts of it) as a
going concern, or setting-up of new business entity as
prescribed in Section 62 hereof, or other similar
arrangements as may be approved by the court or
creditors.

H. Suspended claims/claims

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.
3. Excluded debtors

SEC. 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

© 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.

4. Liquidation process

Section 92. Conversion by the Court into Liquidation Proceedings. –

During the pendency of court-supervised 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.

5. Cross border insolvency

(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.

Securities Regulations Code (R.A. 8799) and related laws

1. State policy

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.

2. Definition of Securities

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.

3. Kinds and of securities

a. Exempt Securities

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.

© Certificates issued by a receiver or by a trustee in bankruptcy duly

approved by the proper adjudicatory body.

(c) 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.

€ 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.

b. Exempt transaction

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.

© 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.
 (c) 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.

€ 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.

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.

c. Non-exempt transactions

transaction prohibited by ERISA § 406 or Code § 4975, for which no

statutory exemption or U.S. Department of Labor class exemption is
available.[[.“Payee” means any payee under the Contract, including
annuitants, contingent annuitants, alternate payees and beneficiaries, as
applicable.

4. Prohibitions on fraud, manipulation, and insider trading

a. Short sales
 A short sale is a sale of real estate in which the net proceeds from
selling the property will fall short of the debts secured by liens
against the property. In this case, if all lien holders agree to accept
less than the amount owed on the debt, a sale of the property can
be accomplished.

b. Insider trading

Insider trading is illegal is because it gives the insider an unfair

advantage in the market, puts the interests of the insider above
those to whom he or she owes a fiduciary duty, and allows an
insider to artificially influence the value of a company’s stocks.

c. Option trading

Options are a type of derivative security. … If you buy an options

contract, it grants you the right, but not the obligation to buy or sell
an underlying asset at a set price on or before a certain date. A call
option gives the holder the right to buy a stock and a put option
gives the holder the right to sell a stock.

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.

d. Fraudulent transactions

Transaction Fraud occurs when a stolen payment card or data is

used to generate an unauthorized transaction. The move to real-
time transactions is causing significant security challenges for
banks, merchants and issuers alike. Quicker transaction times
increase the chances of fraudulent transactions going undetected.

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.

Protection of shareholder Interests

e. Tender offer rule

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.

f. Rule on proxy solicitation

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.

g. Disclosure rule

Disclosure is the process of making facts or information known to

the public. Proper disclosure by corporations is the act of making
its customers, investors, and any people involved in doing business
with the company aware of pertinent information.

General Banking law R.A. 8791

1. Definition and classifications of banks

Section 3. Definition and Classification of Banks. –

3.1. “Banks” shall refer to entities engaged in the lending of funds obtained
in the form of deposits. (2a)

3.2. Banks shall be classified into:

(a) Universal banks;

(b) Commercial banks;

© Thrift banks, composed of: (i) Savings and mortgage banks, (ii) Stock
savings and loan associations, and (iii) Private development banks, as defined
in the Republic Act No. 7906 (hereafter the “Thrift Banks Act”);

(c) Rural banks, as defined in Republic Act No. 73S3 (hereafter the “Rural
Banks Act”);

€ Cooperative banks, as defined in Republic Act No 6938 (hereafter the

“Cooperative Code”);

(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the
“Charter of Al Amanah Islamic Investment Bank of the Philippines”; and

(g) Other classifications of banks as determined by the Monetary Board of the

Bangko Sentral ng Pilipinas. (6-Aa).

2. Distinction of banks from quasi-banks

Section 6. Authority to Engage in Banking and Quasi-Banking Functions. – No

person or entity shall engage in banking operations or quasi-banking
functions without authority from the Bangko Sentral: .Provided, however, That
an entity authorized by the Bangko Sentral to perform universal or
commercial banking functions shall likewise have the authority to engage in
quasi-banking functions.

The determination of whether a person or entity is performing banking or

quasi-banking functions without Bangko Sentral authority shall be decided by
the Monetary Board. To resolve such issue, the Monetary Board may; through
the appropriate supervising and examining department of the Bangko Sentral,
examine, inspect or investigate the books and records of such person or
entity. Upon issuance of this authority, such person or entity may commence
to engage in banking operations or quasi-banking function and shall continue
to do so unless such authority is sooner surrendered, revoked, suspended or
annulled by the Bangko Sentral in accordance with this Act or other special
laws.

The department head and the examiners of the appropriate supervising and
examining department are hereby authorized to administer oaths to any such
person, employee, officer, or director of any such entity and to compel the
 presentation or production of such books, documents, papers or records that
are reasonably necessary to ascertain the facts relative to the true functions
and operations of such person or entity. Failure or refusal to comply with the
required presentation or production of such books, documents, papers or
records within a reasonable time shall subject the persons responsible
therefore to the penal sanctions provided under the New Central Bank Act.

Persons or entities found to be performing banking or quasi-banking

functions without authority from the Bangko Sentral shall be subject to
appropriate sanctions under the New Central Bank Act and other applicable
laws. (4a)

Section 7. Examination by the Bangko Sentral. – The Bangko Sentral shall,

when examining a bank, have the authority to examine an enterprise which is
wholly or majority-owned or controlled by the bank. (2-Ba).

3.Nature of bank funds and bank deposits

The keeping of deposits is one of the chief functions of banks at the present
time and is directly connected with the currency function. Two classes of
deposits, however, must be distinguished.

A. Deposits of securities. – The growth of so-called stock

companies and the development of the credit system has brought
into existence a great variety of securities the safe-keeping of
which is a matter of prime importance. It rarely happens that the
owners of these securities possess the same facilities for their
safe-keeping as do banks whose business by its very nature
compels them to provide large, strong, fire-proof safes, night-
watchmen, and every other means for protection against robbers,
fire, damp, and dust. That enormous quantities of these securities
should, therefore, be entrusted to the safe-keeping of banks is
natural, and that special institutions for the performance of this
function should have developed in large business centres is not
surprising.

B. Deposits of money. – The most important form of deposits is that

of money. People of all classes deposit with banks the greater
part of the money which comes into their hands. Ordinarily one
keeps on hand no more than is necessary to make small
purchases or to transact current business. Merchants usually
 make a deposit every day of the cash received, keeping in their
tills only a relatively small sum for the purpose of making change,
while people with salaries and wage-earners deposit their funds
monthly or weekly as they are received, unless they need to pay
them out immediately in the making of purchases or in the
settlement of accounts, in which cases the money is simply
transferred to other people, who deposit it in the banks to their
own accounts.

4. Grant of loans and security requirements

SECTION 39. Grant and Purpose of Loans and Other Credit Accommodations. –
A bank shall grant loans and other credit accommodations only in amounts and
for the periods of time essential for the effective completion of the operations to
be financed. Such grant of loans and other credit accommodations shall be
consistent with safe and sound banking practices.

The purpose of all loans and other credit accommodations shall be stated in the
application and in the contract between the bank and the borrower. If the bank
finds that the proceeds of the loan or other credit accommodation have been
employed, without its approval, for purposes other than those agreed upon with
the bank, it shall have the right to terminate the loan or other credit
accommodation and demand immediate repayment of the obligation.

SECTION 40. Requirement for Grant Of Loans or 0ther Credit Accommodations. –

Before granting a loan or other credit accommodation, a bank must ascertain
that the debtor is capable of fulfilling his commitments to the bank.

Toward this end, a bank may demand from its credit applicants a statement of
their assets and liabilities and of their income and expenditures and such
information as may be prescribed by law or by rules and regulations of the
Monetary Board to enable the bank to properly evaluate the credit application
which includes the corresponding financial statements submitted for taxation
purposes to the Bureau of Internal Revenue. Should such statements prove to be
false or incorrect in any material detail, the bank may terminate any loan or other
credit accommodation granted on the basis of said statements and shall have
the right to demand immediate repayment or liquidation of the obligation.
 In formulating rules and regulations under this Section, the Monetary Board shall
recognize the peculiar characteristics of micro financing, such as cash flow-
based lending to the basic sectors that are not covered by traditional collateral.

SECTION 41. Unsecured Loans or Other Credit Accommodations. – The

Monetary Board is hereby authorized to issue such regulations as it may deem
necessary with respect to unsecured loans or other credit accommodations that
may be granted by banks. (n)

SECTION 42. Other Security Requirements for Bank Credits. – The Monetary
Board may, by regulation, prescribe further security requirements to which the
various types of bank credits shall be subject, and, in accordance with the
authority granted to it in Section 106 of the New Central Bank Act, the Board may
by regulation, reduce the maximum ratios established in Sections 36 and 37 of
this Act, or, in special cases, increase the maximum ratios established therein.

5. Foreign currency deposits

A foreign currency fixed deposit (FCFD) is a time deposit issued by banks to

investors who would like to keep foreign currency for future use or hedge against
foreign currency fluctuation. The money deposited in the FCFD account cannot
be withdrawn until the agreed fixed term has expired.

Law on secrecy bank deposits

REPUBLIC ACT No. 1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY

BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR.

1. Purpose

Section 1. It is hereby declared to be the policy of the Government to give

encouragement to the people to deposit their money in banking institutions and
to discourage private hoarding so that the same may be properly utilized by
banks in authorized loans to assist in the economic development of the
country.

2. Prohibited Acts
 Section 3. It shall be unlawful for any official or employee of a banking
institution to disclose to any person other than those mentioned in Section two
hereof any information concerning said deposits.

Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules
and Regulations which are inconsistent with the provisions of this Act are hereby
repealed.

3. Deposits covered

Section 2. 1 All deposits of whatever nature with banks or banking institutions

in the Philippines including investments in bonds issued by the Government of
the Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office,
except upon written permission of the depositor, or in cases of impeachment,
or upon order of a competent court in cases of bribery or dereliction of duty of
public officials, or in cases where the money deposited or invested is the
subject matter of the litigation.

4. Exceptions

Section 5. Any violation of this law will subject offender upon conviction, to an
imprisonment of not more than five years or a fine of not more than twenty
thousand pesos or both, in the discretion of the court.

Section 6. This Act shall take effect upon its approval.

5. Garnishing deposits, including foreign deposits

REPUBLIC ACT No. 6426

AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE

PHILIPPINES, AND FOR OTHER PURPOSES.

Section 3. Authority of banks to accept foreign currency deposits. – The banks

designated by the Central Bank under Section two hereof shall have the
authority:

(1) To accept deposits and to accept foreign currencies in trust

Provided, That numbered accounts for recording and
servicing of said deposits shall be allowed;
 (2) To issue certificates to evidence such deposits;

(3) To discount said certificates;

(4) To accept said deposits as collateral for loans subject to

such rules and regulations as may be promulgated by the
Central Bank from time to time; and

(5) To pay interest in foreign currency on such deposits.

Section 8. Secrecy of foreign currency deposits. – All foreign

currency deposits authorized under this Act, as amended by
PD No. 1035, as well as foreign currency deposits authorized
under PD No. 1034, are hereby declared as and considered
of an absolutely confidential nature and, except upon the
written permission of the depositor, in no instance shall
foreign currency deposits be examined, inquired or looked
into by any person, government official, bureau or office
whether judicial or administrative or legislative, or any other
entity whether public or private; Provided, however, That said
foreign currency deposits shall be exempt from attachment,
garnishment, or any other order or process of any court,
legislative body, government agency or any administrative
body whatsoever. (As amended by PD No. 1035, and further
amended by PD No. 1246, prom. Nov. 21, 1977.)

6. Penalties for violation

Section 10. Penal provisions. – Any willful violation of this Act or any regulation
duly promulgated by the Monetary Board pursuant hereto shall subject the
offender upon conviction to an imprisonment of not less than one year nor
more than five years or a fine of not less than five thousand pesos nor more
than twenty-five thousand pesos, or both such fine and imprisonment at the
discretion of the court.

7. Foreign ownership

a. Individuals and non-banks

Section 4. Foreign currency cover requirements. – Except as the

Monetary Board may otherwise prescribe or allow, the depository banks
 shall maintain at all times a one hundred percent foreign currency cover
for their liabilities, of which cover at least fifteen percent shall be in the
form of foreign currency deposit with the Central Bank, and the balance
in the form of foreign currency loans or securities, which loans or
securities shall be of short term maturities and readily marketable. Such
foreign currency loans may include loans to domestic enterprises which
are export-oriented or registered with the Board of Investments, subject
to the limitations to be prescribed by the Monetary Board on such loans.
Except as the Monetary Board may otherwise prescribe or allow, the
foreign currency cover shall be in the same currency as that of the
corresponding foreign currency deposit liability. The Central Bank may
pay interest on the foreign currency deposit, and if requested shall
exchange the foreign currency notes and coins into foreign currency
instruments drawn on its depository banks. (As amended by PD No.
1453, June 11, 1978.)

Depository banks which, on account of networth, resources, past

performance, or other pertinent criteria, have been qualified by the
Monetary Board to function under an expanded foreign currency deposit
system, shall be exempt from the requirements in the preceding
paragraph of maintaining fifteen percent (15%) of the cover in the form
of foreign currency deposit with the Central Bank. Subject to prior
Central Bank approval when required by Central Bank regulations, said
depository banks may extend foreign currency loans to any domestic
enterprise, without the limitations prescribed in the preceding paragraph
regarding maturity and marketability, and such loans shall be eligible for
purposes of the 100% foreign currency cover prescribed in the preceding
paragraph. (As added by PD No. 1035.).

b. Foreign banks

The term “foreign bank” generally refers to any United States operation
of a banking organization headquartered outside of the U.S.The first
foreign banks established their presence in the United States in the mid-
1800’s, with New York being the first state to license or regulate these
institutions.

Philippine deposit Insurance Corporation Act. 3591

1.Basic policy
SECTION 1. Section 1 of Republic Act No. 3591, as amended, is hereby
amended to read as follows:

“THE CREATION OF THE PHILIPPINE

DEPOSIT INSURANCE CORPORATION

“SECTION 1. — There is hereby created a Philippine Deposit Insurance

Corporation hereinafter referred to as the ‘Corporation’ which shall insure as
herein provided, the deposits of all banks which are entitled to the benefits of
insurance under this Act, and which shall have the powers hereinafter granted.

“The Corporation shall, as a basic policy, promote and safeguard the interests
of the depositing public by providing insurance coverage on all insured deposits
and helping maintain a sound and stable banking system.”

2. Meaning of deposit

Section 3. As used in this Act—

(f) The term “deposit” means the unpaid balance of money or its
equivalent received by a bank in the usual course of business and for
which it has given or is obliged to give credit to a commercial, checking,
savings, time or thrift account or which is evidenced by its certificate of
deposit, and trust funds held by such bank whether retained or deposited
in any department of such bank or deposited in another bank, together
with such other obligations of a bank as the Board of Directors shall find
and shall prescribe by regulations to be deposit liabilities of the Bank:
Provided, That any obligation of a bank which is payable at the office of
the bank located outside of the Philippines shall not be a deposit for any
of the purposes of this Act or included as part of the total deposits or of
the insured deposit: Provided, further, That any insured bank which is
incorporated under the laws of the Philippines which maintains a branch
outside the Philippines may elect to include for insurance its deposit
obligation payable only at such branch.

3. Concept of Insured deposit

Section 3. As used in this Act—

(g) The term “insured deposit” means the net amount due to any depositor
for deposits in an insured bank (after deducting offsets) less any part
 thereof which is in excess of ₱10,000. Such net amount shall be
determined according to such regulations as the Board of Directors may
prescribe and in determining the amount due to any depositor there shall
be added together all deposits in the bank maintained in the same
capacity and the same right for his benefit or in his own name or in the
names of others.

4. Deposits not covered by insurance

Section 16.

(c) No insured bank shall pay any dividend on its capital stock or interest
on its capital notes or debentures (if such interest is required to be
paid only out of net profits) or distribute any of its capital assets while
it remains in default in the payment of any assessment due to the
Corporation; and any director or officer of any insured bank who
participates in the declaration or payment of any such dividend or
interest or in any such distribution shall, upon conviction, be fined not
more than ₱1,000 or imprisoned not more than one year, or both:
Provided, That if such default is due to a dispute between the insured
bank and the Corporation over the amount of such assessment, this
subsection shall not apply, if such bank shall deposit security
satisfactory to the Corporation of payment upon final determination of
the issue.

© Without prior written consent by the Corporation, no insured bank shall (1)
merge or consolidate with any noninsured bank or institution or convert into a
noninsured bank or institution or (2) assume liability to pay any deposits made
in, or similar liabilities of, any noninsured bank or institution or (3) transfer
assets to any noninsured bank or institution in consideration of the assumption
of liabilities for any portion of the deposits made in such insured bank.

5.Splitting of deposits

Splitting of deposit occurs when a deposit account of more than the maximum
deposit insurance coverage under the name of a natural or juridical person is
broken down and transferred into two or more accounts in the names of persons
or entities with no beneficial ownership on the transferred deposits.

Corporation
REPUBLIC ACT No. 11232

An Act Providing for the Revised Corporation Code of the Philippines

1.Definition of corporation

Section 2. Corporation Defined. – A corporation is an artificial being created by

operation of law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incidental to its existence.

2.Classes of Corporation

Section 3. Classes of Corporations. – Corporations formed or organized

under this Code may be stock or nonstock corporations. Stock
corporations are those which have capital stock divided into shares and
are authorized to distribute to the holders of such shares, dividends, or
allotments of the surplus profits on the basis of the shares held. All other
corporations are nonstock corporations.

3. Nationality of Corporation

a.Control test

. Control test – Determined by the nationality of the controlling

stockholders or members. This test is applied in times of war.

b.Grandfather rule

Grandfather rule – Nationality is attributed to the percentage of equity in

the corporation used in nationalized or partly nationalized area.

4. Corporate juridical personality

. The veil of corporate fiction may be pierced when the fiction of corporate
entity is being used as a cloak or cover for fraud or illegality or to defeat
public convenience, justify wrong, protect fraud or defend crime.
Nevertheless, in order to disregard the separate juridical personality of a
corporation, the wrongdoing must be clearly and convincingly established.
Mere ownership by a single stockholder of all or nearly all of the capital
stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality. The same rule holds true even if the
incorporators of two corporations are substantially identical.
The separate juridical personality of the corporation enables it to act as
though it were a person. As an artificial being, it may own properties,
transact and commit acts expressly authorized by law or incidental to its
existence. Unless otherwise provided by law, the corporation can only act
through its board of directors (for stock corporations) or board of trustees
(for non-stock corporations). These acts are usually embodied in board
resolutions and confirmed in the certificates issued by the corporate
secretary. However, it bears great emphasis that the board of directors
may expressly delegate specific powers to any of its officers. Nonetheless,
the power of the board is not without limitation. There are certain
corporate acts which require the approval of the stockholders such as
extending or shortening the corporate term, increasing or decreasing the
capital stock and investing in a business for a purpose other than the
primary purpose for which the corporation was organized, among others.
It is recommended that you secure the services of a retainer firm or
counsel to advise you on corporate matters.

5.Foreign Corporations

a. “Doing business”

SECTION. 1. Definition and scope of this Act. – (1) x x x the phrase ‘doing
business’ shall include soliciting orders, purchases, service contracts,
opening offices, whether called ‘liaison’ offices or branches; appointing
representatives or distributors who are domiciled in the Philippines or who
in any calendar year stay in the Philippines for a period or periods totaling
one hundred eighty days or more; participating in the management,
supervision or control of any domestic business firm, entity or corporation
in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions
normally incident to, and in progressive prosecution of, commercial gain
or of the purpose and object of the business organization.”

There are other statutes27 defining the term “doing business” in the same
tenor as those above-quoted, and as may be observed, one common
denominator among them all is the concept of “continuity.”

In the case at bar, the Court of Appeals categorized as “doing business”

petitioner’s participation under the “Assignment Agreement” and the
“Deed of Assignment.” This is simply untenable. The expression “doing
business” should not be given such a strict and literal construction as to
make it apply to any corporate dealing whatever.28 At this early stage and
with petitioner’s acts or transactions limited to the assignment contracts,
it cannot be said that it had performed acts intended to continue the
business for which it was organized. It may not be amiss to point out that
the purpose or business for which petitioner was organized is not
discernible in the records. No effort was exerted by the Court of Appeals
to establish the nexus between petitioner’s business and the acts
supposed to constitute “doing business.” Thus, whether the assignment
contracts were incidental to petitioner’s business or were continuation
thereof is beyond determination.

b.Necessity of a license to do business/requisites for insurance of

license

Each state requires insurance agents to hold a license to sell policies.

Most states require separate licenses to sell property and casualty
insurance versus life and health insurance. The majority of states also
require licensed insurance agents to complete continuing education
programs every two years.

1 – Continuing Education (CE) is only necessary in your home state.

While each state requires you to file an application to obtain an
insurance license in their state, you don’t have to complete CE for each
state. Once you have met the requirements in your home state, all other
states are reciprocal and no additional CE is necessary.

2 – Agency (business entity) licensing is required in most states. If you

have agents within your agency writing business in a state, most likely
the agency will need to hold a license also. There are only a handful of
states (IA, RI, TN, VT & WI) that don’t require an agency to hold a license.
It isn’t enough to just have the producer licensed. The agency must also
hold a license.

3 – Registered agents are required for Certificate of Authority (COA)

filings. A number of states require an agency to provide proof of a
Certificate of Authority with the Secretary of State’s office as part of the
agency licensing process. The COA registration asks for a registered
agent to be listed on the filing. A registered agent, also known as a
resident agent or statutory agent, is a business or individual designated
to receive service of process (SOP) when a business entity is a party in a
 legal action such as a lawsuit or summons. There are a number of
companies that provide registered agent services throughout the United
States.

4 – When an agency holds a Certificates of Authority in various states,

additional filings are required. Most states require an annual report filing,
which is generally just an updated list of officers. Others mandate
franchise tax or other tax filings. If these filings are not made, the
certificate can be suspended or revoked which could cause the
insurance license to be cancelled.

5 – Administrative actions must be reported to every state. Hopefully

you or your agency will never be subject to an administrative action.
However, if one does occur, it must be reported to every state where you
hold a license within 30 days. When an administrative action is on an
officer of an agency, it must also be reported to every state where the
agency is licensed. If not reported within the 30 day time frame, states
may and frequently do issue their own actions for failure to report, which
starts the reporting process again.

6.Merger and consolidation

During a merger, essentially other corporate entities become a part of an existing entity.
This can be useful for smaller companies merging into larger companies that have greater
brand recognition and market traction.
Conversely, a consolidation is when multiple companies join to form a new entity.