A.

Anti-Money Laundering Act

(R.A. No. 9160, as amended by R.A. No. 9194,
R.A. No. 10167, R.A. No. 10365 and R.A. No. 10297)
1. Policy of the Law

- Sec. 2, AMLA

 To protect and preserve the integrity and confidentiality of bank accounts and
 to ensure that the Philippines shall not be used as a money laundering site for the proceeds of any unlawful activity.
 Consistent with its foreign policy, the State shall extend cooperation in transnational investigations and prosecutions
of persons involved in money laundering activities wherever committed.

2. Covered Persons (Natural or Juridical)

- Sec. 3 (a), AMLA, as amended by R.A. No. 10927

- Now includes casinos, including internet and ship-based casinos, with respect to their casino cash transactions
from their gaming operations (Sec. [a.8], as amended by R.A. No. 10927)

1. banks, non-banks, quasi-banks, trust entities, foreign exchange dealers, pawnshops, money changers, remittance
and transfer companies and other similar entities and all other persons and their subsidiaries and affiliates
supervised or regulated by the Bangko Sentral ng Pilipinas (BSP);

2. insurance companies, pre-need companies and all other persons supervised or regulated by the Insurance
Commission (IC);

3. (i) securities dealers, brokers, salesmen, investment houses and other similar persons managing securities or
rendering services as investment agent, advisor, or consultant, (ii) mutual funds, close-end investment companies,
common trust funds, and other similar persons, and (iii) other entities administering or otherwise dealing in currency,
commodities or financial derivatives based thereon, valuable objects, cash substitutes and other similar monetary
instruments or property supervised or regulated by the Securities and Exchange Commission (SEC);

4. jewelry dealers in precious metals, who, as a business, trade in precious metals, for transactions in excess of One
million pesos (P1,000,000.00);

5. jewelry dealers in precious stones, who, as a business, trade in precious stones, for transactions in excess of One
million pesos (P1,000,000.00);

6. company service providers which, as a business, provide any of the following services to third parties: (i) acting as a
formation agent of juridical persons; (ii) acting as (or arranging for another person to act as) a director or corporate
secretary of a company, a partner of a partnership, or a similar position in relation to other juridical persons; (iii)
providing a registered office, business address or accommodation, correspondence or administrative address for a
company, a partnership or any other legal person or arrangement; and (iv) acting as (or arranging for another
person to act as) a nominee shareholder for another person; and

7. persons who provide any of the following services:

(i) managing of client money, securities or other assets;
(ii) management of bank, savings or securities accounts;
(iii) organization of contributions for the creation, operation or management of companies; and
(iv) creation, operation or management of juridical persons or arrangements, and buying and selling business
entities.

Notwithstanding the foregoing, the term ‘covered persons’ shall exclude lawyers and accountants acting as
independent legal professionals in relation to information concerning their clients or where disclosure of information
would compromise client confidences or the attorney-client relationship: Provided, That these lawyers and
accountants are authorized to practice in the Philippines and shall continue to be subject to the provisions of their
respective codes of conduct and/or professional responsibility or any of its amendments

8. casinos, including internet and ship-based casinos, with respect to their casino cash transactions related to
their gambling operations (NEW)

- On what are casinos, internet-based casinos, etc., see Sec. 3 [L.1 to 3], AMLA, as amended by R.A. No. 10297
(1) ‘Casino’ refers to a business authorized by the appropriate government agency to engage in gaming operations:

(i) ‘Internet-based casinos’ shall refer to casinos in which persons participate by the use of remote communication facilities
such as, but not limited to, internet, telephone, television, radio or any other kind of electronic or other technology for
facilitating communication; and

(ii) ‘Ship-based casino’ shall refer to casinos, the operation of which is undertaken on board a vessel, ship, boat or any other
water-based craft wholly or partly intended for gambling;

(2) ‘Casino cash transaction’ refers to transactions involving the receipt of cash by a casino paid by or on behalf of a
customer, or transactions involving the payout of cash by a casino to a customer or to any person in his/her behalf; and

(3) ‘Gaming operations’ refer to the activities of the casino offering games of chance and any variations thereof approved by
the appropriate government authorities.

3. Obligations of Covered Persons

- Sec. 9, AMLA

SEC. 9. Prevention of Money Laundering; Customer Identification Requirements and Record Keeping.
a. Customer Identification. - Covered institutions shall establish and record the true identity of its clients based on
official documents. They shall maintain a system of verifying the true identity of their clients and, in case of corporate
clients, require a system of verifying their legal existence and organizational structure, as well as the authority and
identification of all persons purporting to act on their behalf. The provisions of existing laws to the contrary
notwithstanding, anonymous accounts, accounts under fictitious names, and all other similar accounts shall be
absolutely prohibited. Peso and foreign currency non-checking numbered accounts shall be allowed. The BSP may
conduct annual testing solely limited to the determination of the existence and true identity of the owners of such
accounts.

b. Record Keeping. - All records of all transactions of covered institutions shall be maintained and safely stored for five
(5) years from the dates of transactions. With respect to closed accounts, the records on customer identification,
account files and business correspondence, shall be preserved and safely stored for at least five (5) years from the
dates when they were closed.

****(Have to note this because letter (c) has been amended but the amendment sort of confuses: PLS TAKE NOTE

RA 9194 AMENDMENT RA 10365 AMENDMENT

c. Reporting of Covered and Suspicious Transactions. --
Covered institutions shall report to the AMLC all
covered transactions and suspicious transactions
within five(5) working days from occurrences thereof,
unless the Supervising Authority prescribes a longer
period not exceeding ten (10) working days.
Should a transaction be determined to be both a
covered transaction and a suspicious transaction, the
covered institution shall be required to report the same
as a suspicious transaction.
When reporting covered or suspicious transactions to
the AMLC, covered institutions and their officers and
employees shall not be deemed to have violated
Republic Act No. 1405, as amended, Republic Act No.
6426, as amended, Republic Act No. 8791 and other
similar laws, but are prohibited from communicating,
directly or indirectly, in any manner or by an means, to
any person, the fact that a covered or suspicious
transaction report was made, the contents thereof, or
any other information in relation thereto. In case of
violation thereof, the concerned officer and employee
of the covered institution shall be criminally liable.
However, no administrative, criminal or civil
Section 9(c), paragraphs 1 and 4 of the same Act are
hereby amended to read as follows:
"SEC. 9. Prevention of Money Laundering; Customer
Identification Requirements and Record Keeping. –
(a) x x x
(b) x x x
(c) Reporting of Covered and Suspicious Transactions. –
Covered persons shall report to the AMLC all covered
transactions and suspicious transactions within five (5)
working days from occurrence thereof, unless the AMLC
prescribes a different period not exceeding fifteen (15)
working days.
Lawyers and accountants acting as independent legal
professionals are not required to report covered and
suspicious transactions if the relevant information was
obtained in circumstances where they are subject to
professional secrecy or legal professional privilege.
xxx
xxx
 proceedings, shall lie against any person for having
made a covered or suspicious transaction report in the
regular performance of his duties in good faith, whether
or not such reporting results in any criminal
prosecution under this Act of any other law.
When reporting covered or suspicious transactions to
the AMLC, covered instituting and their officers and
employees are prohibited from communicating directly
or indirectly, in any manner or by any means, to any
person or entity, the media, the fact that a covered or
suspicious transaction report was made, the contents
thereof, or any other information in relation thereto.
Neither may such reporting be published or aired in
any manner or form by the mass media, electronic
mail, or other similar devices. In case of violation
thereof, the concerned officer and employee of the
covered institution and media shall be held criminally
liable
When reporting covered or suspicious transactions to the
AMLC, covered persons and their officers and employees
are prohibited from communicating, directly or indirectly, in
any manner or by any means, to any person or entity, the
media, the fact that a covered or suspicious transaction has
been reported or is about to be reported, the contents of the
report, or any other information in relation thereto. Neither
may such reporting be published or aired in any manner or
form by the mass media", electronic mail, or other similar
devices. In case of violation thereof, the concerned officer
and employee of the covered person and media shall be
held criminally liable.”

4. Covered Transactions

- Sec. 3 (b), AMLA, as amended by R.A. No. 10297

- THRESHOLD: in excess of PhP500,000 in cash/equivalent monetary instrument within 1one banking day;
for casinos, etc., in excess of PhP5 Million

“Covered transaction” is a transaction in cash or other equivalent monetary instrument involving a total amount in excess of
P500,000.00 within one (1) banking day; for covered persons under Section 3(a)(8), a single casino cash transaction
involving an amount in excess of P5,000,000.00 or its equivalent in any other currency

5. Suspicious Transactions

- Sec. 3 (b.1)
- What are suspicious transactions?

(b-1) 'Suspicious transaction' are transactions with covered institutions, regardless of the amounts involved, where any of the
following circumstances exist:

1. there is no underlying legal or trade obligation, purpose or economic justification;

2. the client is not properly identified;

3. the amount involved is not commensurate with the business or financial capacity of the client;

4. taking into account all known circumstances, it may be perceived that the client's transaction is structured in order to avoid
being the subject of reporting requirements under the Act;

5. any circumstances relating to the transaction which is observed to deviate from the profile of the client and/or the client's
past transactions with the covered institution;

6. the transactions is in a way related to an unlawful activity or offense under this Act that is about to be, is being or has been
committed; or

7. any transactions that is similar or analogous to any of the foregoing.

6. When is Money Laundering Committed?

- Sec. 4, AMLA, as amended by R.A. No. 10365

- Jurisdiction lies with Regional Trial Court. Exception: Sandiganbayan has jurisdiction over those committed by
public officers, and private persons in conspiracy with public officers.
SEC. 4. Money Laundering Offense. – Money laundering is committed by any person who, knowing that any monetary
instrument or property represents, involves, or relates to the proceeds of any unlawful activity:

(a) transacts said monetary instrument or property;

(b) converts, transfers, disposes of, moves, acquires, possesses or uses said monetary instrument or property;

(c) conceals or disguises the true nature, source, location, disposition, movement or ownership of or rights with respect to
said monetary instrument or property;

(d) attempts or conspires to commit money laundering offenses referred to in paragraphs (a), (b) or (c);

(e) aids, abets, assists in or counsels the commission of the money laundering offenses referred to in paragraphs (a), (b) or
(c) above; and

(f) performs or fails to perform any act as a result of which he facilitates the offense of money laundering referred to in
paragraphs (a), (b) or (c) above.

Money laundering is also committed by any covered person who, knowing that a covered or suspicious transaction is
required under this Act to be reported to the Anti-Money Laundering Council (AMLC), fails to do so.

7. Unlawful Activities or Predicate Crimes

- Sec. 3 (i), as amended by R.A. No. 10365

- Should prosecution for money laundering be suspended pending prosecution of predicate crime? See Sec. 6,
AMLA
- Civil Forfeiture – See Rep. v. Glasgow, GR No. 170281, Jan. 18, 2008

(i) ‘Unlawful activity’ refers to any act or omission or series or combination thereof involving or having direct relation to the
following:

(1) Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;

(2) Sections 4, 5, 6, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of Republic Act No. 9165, otherwise known as the Comprehensive
Dangerous Drugs Act of 2002;

(3) Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and
Corrupt Practices Act;

(4) Plunder under Republic Act No. 7080, as amended;

(5) Robbery and extortion under Articles 294, 295, 296, 299, 300, 301 and 302 of the Revised Penal Code, as amended;

(6) Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;

(7) Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532;

(8) Qualified theft under Article 310 of the Revised Penal Code, as amended;

(9) Swindling under Article 315 and Other Forms of Swindling under Article 316 of the Revised Penal Code, as amended;

(10) Smuggling under Republic Act Nos. 455 and 1937;

(11) Violations of Republic Act No. 8792, otherwise known as the Electronic Commerce Act of 2000;

(12) Hijacking and other violations under Republic Act No. 6235; destructive arson and murder, as defined under the Revised
Penal Code, as amended;

(13) Terrorism and conspiracy to commit terrorism as defined and penalized under Sections 3 and 4 of Republic Act No.
9372;

(14) Financing of terrorism under Section 4 and offenses punishable under Sections 5, 6, 7 and 8 of Republic Act No. 10168,
otherwise known as the Terrorism Financing Prevention and Suppression Act of 2012:
(15) Bribery under Articles 210, 211 and 211-A of the Revised Penal Code, as amended, and Corruption of Public Officers
under Article 212 of the Revised Penal Code, as amended;

(16) Frauds and Illegal Exactions and Transactions under Articles 213, 214, 215 and 216 of the Revised Penal Code, as
amended;

(17) Malversation of Public Funds and Property under Articles 217 and 222 of the Revised Penal Code, as amended;

(18) Forgeries and Counterfeiting under Articles 163, 166, 167, 168, 169 and 176 of the Revised Penal Code, as amended;

(19) Violations of Sections 4 to 6 of Republic Act No. 9208, otherwise known as the Anti-Trafficking in Persons Act of 2003;

(20) Violations of Sections 78 to 79 of Chapter IV, of Presidential Decree No. 705, otherwise known as the Revised Forestry
Code of the Philippines, as amended;

(21) Violations of Sections 86 to 106 of Chapter VI, of Republic Act No. 8550, otherwise known as the Philippine Fisheries
Code of 1998;

(22) Violations of Sections 101 to 107, and 110 of Republic Act No. 7942, otherwise known as the Philippine Mining Act of
1995;

(23) Violations of Section 27(c), (e), (f), (g) and (i), of Republic Act No. 9147, otherwise known as the Wildlife Resources
Conservation and Protection Act;

(24) Violation of Section 7(b) of Republic Act No. 9072, otherwise known as the National Caves and Cave Resources
Management Protection Act;

(25) Violation of Republic Act No. 6539, otherwise known as the Anti-Carnapping Act of 2002, as amended;

(26) Violations of Sections 1, 3 and 5 of Presidential Decree No. 1866, as amended, otherwise known as the decree
Codifying the Laws on Illegal/Unlawful Possession, Manufacture, Dealing In, Acquisition or Disposition of Firearms,
Ammunition or Explosives;

(27) Violation of Presidential Decree No. 1612, otherwise known as the Anti-Fencing Law;

(28) Violation of Section 6 of Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of
1995, as amended by Republic Act No. 10022;

(29) Violation of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines;

(30) Violation of Section 4 of Republic Act No. 9995, otherwise known as the Anti-Photo and Video Voyeurism Act of 2009;

(31) Violation of Section 4 of Republic Act No. 9775, otherwise known as the Anti-Child Pornography Act of 2009;

(32) Violations of Sections 5, 7, 8, 9, 10(c), (d) and (e), 11, 12 and 14 of Republic Act No. 7610, otherwise known as the
Special Protection of Children Against Abuse, Exploitation and Discrimination;

(33) Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the Securities Regulation
Code of 2000; and

(34) Felonies or offenses of a similar nature that are punishable under the penal laws of other countries

8. Anti-Money Laundering Council

- Sec. 7, AMLA, as amended by R.A. No. 10365

SEC. 7. Creation of Anti-Money Laundering Council (AMLC). –  The Anti-Money Laundering Council is hereby created and
shall be composed of the Governor of the Bangko Sentral ng Pilipinas as Chairman, the Commissioner of the Insurance
Commission and the Chairman of the Securities and Exchange Commission, as members. The AMLC shall act unanimously
in the discharge of its functions as defined hereunder:

xxx

(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be
laundered, proceeds from, or instrumentalities used in or intended for use in any unlawful activity as defined in Section 3(i)
hereof;

xxx

(12) to require the Land Registration Authority and all its Registries of Deeds to submit to the AMLC, reports on all real estate
transactions involving an amount in excess of Five hundred thousand pesos (P500,000.00) within fifteen (15) days from the
date of registration of the transaction, in a form to be prescribed by the AMLC. The AMLC may also require the Land
Registration Authority and all its Registries of Deeds to submit copies of relevant documents of all real estate transactions

9. Functions

- Sec. 7, AMLA, as amended by R.A. No. 9194

SEC.7. Creation of Anti-Money Laundering Council (AMLC). -- The Anti-Money Laundering Council is hereby created and
shall be composed of the Governor of the Bangko Sentral ng Pilipinas as chairman, the Commissioner of the Insurance
Commission and the Chairman of the Securities and Exchange Commission as member. The AMLC shall shall act
unanimously in the discharge of its functions as defined hereunder:

(1) to require and receive covered or suspicious transaction reports from covered institutions;

(2) to issue orders addressed to the appropriate Supervising Authority or the covered institutions to determine the true identity
of the owner of any monetary instrument or preperty subject of a covered transaction or suspicious transaction report or
request for assistance from a foreign State, or believed by the Council, on the basis fo substantial evidence, to be, in whole
or in part, wherever located, representing, involving, or related to directly or indirectly, in any manner or by any means, the
proceeds of an unlawful activitity.

(3) to institute civil forfeiture proceedings and all other remedial proceedings through the Office of th Solicitor General;

(4) to cause the filing of complaints with the Department of Justice or the Ombudsman for the prosecution of money
laundering offenses;

(5) to investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC,
money laundering activities and other violations of this Act;

(6) to apply before the Court of Appeals, ex parte, for the freezing of any monetary instrument or property alleged to be the
proceeds of any unlawful activity as defined in Section 3(i) hereof;

(7) to implement such measures as may be necessary and justified under this Act to counteract money laundering;

(8) to receive and take action in respect of, any request from foreign states for assistance in their own anti-money laundering
operations provided in this Act;

(9) to develop educational programs on the pernicious effects of money laundering, the methods and techniques used in the
money laundering, the viable means of preventing money laundering and the effective ways of prosecuting and punishing
offenders;

(10) to enlist the assistance of any branch, department, bureau, office, agency, or instrumentality of the government,
including government-owned and -controlled corporations, in undertaking any and all anti-money laundering operations,
which may include the use of its personnel, facilities and resources for the more resolute prevention, detection, and
investigation of money laundering offenses and prosecution of offenders; and

(11) to impose administrative sanctions for the violation of laws, rules, regulations, and orders and resolutions issued
pursuant thereto.

10. Freezing of Monetary Instrument or Property

- Sec. 10, AMLA, as amended by R.A. No. 10927

- Only Court of Appeals has authority to issue Freeze Order
- What is the nature of a Freeze Order? See Ligot v. Rep., GR No. 176944, March 6, 2013
SEC. 10. Freezing of Monetary Instrument or Property. – Upon a verified ex parte petition by the AMLC and after
determination that probable cause exists that any monetary instrument or property is in any way related to an unlawful activity
as defined in Section 3(i) hereof, the Court of Appeals may issue a freeze order which shall be effective immediately, for a
period of twenty (20) days. Within the twenty (20)-day period, the Court of Appeals shall conduct a summary hearing, with
notice to the parties, to determine whether or not to modify or lift the freeze order, or extend its effectivity. The total period of
the freeze order issued by the Court of Appeals under this provision shall not exceed 6 months. This is without prejudice to
an asset preservation order that the Regional Trial Court having jurisdiction over the appropriate anti-money laundering case
or civil forfeiture case may issue on the same account depending on the circumstance of the case, where the Court of
Appeals will remand the case and its records; Provided, that if there is non case filed against a person whose account has
been frozen within the period determined by the Court of Appeals, not exceeding 6 months, the freeze order shall be deemed
ipso facto lifted: Provided, further, That this new rule shall not apply to pending cases in the courts. In any case, the court
should act on the petition to freeze within 24 hours from filing of the petition. If the application is filed a day before a
nonworking day, the computation of the 24 hour period shall exclude the nonworking days.

The freeze order or asset preservation order issued under this Act shall be limited only to the amount of cash or monetary
instrument or value of property that the court finds there is probable cause to be considered as proceeds of a predicate
offense, and the freeze order or asset preservation order shall not apply to amounts in the same account in excess of the
amount or value of the proceeds of the predicate offense.

xxx

***(Note from RA 10365; the “xxx” above may refer to this):

A person whose account has been frozen may file a motion to lift the freeze order and the court must resolve this motion
before the expiration of the freeze order.

No court shall issue a temporary restraining order or a writ of injunction against any freeze order, except the Supreme Court

11. Authority to Inquire Into Bank Deposits

- Sec. 11 on authority of AMLC to inquire into bank deposits is CONSTITUTIONAL. See Subido Pagente Certeza
Mendoza and Binay Law Offices v. Court of Appeals, GR No. 216914, December 6, 2016
- AMLC is not an investigative body exercising quasi-judicial functions, hence Sec. 11 of AMLA authorizing
a bank inquiry does not violate a respondent's constitutional right to procedural due process. See Subido etc. v.
Court of Appeals, ibid.
- Sec. 11, AMLA: 3 Elements: (1) ex-parte application by AMLC; (2) determination of probable cause by the Court
of Appeals; and (3) exceptions of court order in unlawful activities defined in Sec. 3 (I), 1, 2 and 12 (Subido, etc. v.
Court of Appeals, ibid.).

- NOTE: No court order necessary for Unlawful Activities under Sec. 3 (i), 1 (Kidnapping for Ransom), 2
(Dangerous Drugs Act) and 12 (Hijacking, Destructive Arson and Murder).

SEC. 11. Authority to Inquire into Bank Deposits. – Notwithstanding the provisions of Republic Act No. 1405, as amended;
Republic Act No. 6426, as amended; Republic Act No. 8791, and other laws, the AMLC may inquire into or examine any
particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent
court in cases of violation of this Act when it has been established that there is probable cause that the deposits or
investments involved are in any way related to a money laundering offense: Provided, That this provision shall not apply to
deposits and investments made prior to the effectivity of this Act.

- Authority of AMLC under Sec. 11 to inquire into bank deposits extends to RELATED ACCOUNTS
- Sec. 21, AMLA. New provision introduced by R.A. No. 10365 – authority of AMLC to inquire or examine
main/related accounts must comply with Art. III, Sections 2 and 3 of the 1987 Constitution.

SEC. 21. The authority to inquire into or examine the main account and the related accounts shall comply with the
requirements of Article III, Sections 2 and 3 of the 1987 Constitution, which are hereby incorporated by reference. Likewise,
the constitutional injunction against ex post facto laws and bills of attainder shall be respected in the implementation of this
Act
B. Foreign Investments Act
(R.A No. 7042, as amended by R.A. No. 8179)
1. Policy of the Law

- Sec. 2, FIA
 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
o 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

- Sec. 3, FIA
- Who is a “Philippine National”? See Sec. 3 (a), FIA
 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 corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of
which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos
or
 a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine
national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: provided,
 Where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC)
registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both
corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members
of the Board of Directors, in order that the corporation shall be considered a Philippine national.

a. Foreign Investment – Sec. 3 (c), FIA

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 - Sec. 3 (d), FIA

 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;
o 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. Foreign Investment in Export Enterprise - Sec. 6, FIA. Up to 100% as to export enterpises not falling
under Lists A and B in Sec. 8.

d. Foreign Investment in Domestic Market Enterprise - Non-Philippine Nationals may own up to 100%
unless foreign ownership is prohibited/limited by Constitution and other laws. See Sec. 7, FIA

Foreign Investments in Domestic Market Enterprises. – Non-Philippine nationals may own up to one hundred percent (100%)
of domestic market enterprises unless foreign ownership therein is prohibited or limited by the Constitution and existing law
or the Foreign Investment Negative List under Sec. 8 hereof."

3. List of Investment Areas Reserved to Philippine Nationals (Foreign Investment Negative List)

- Sec. 8. Two Components: a) List A; and b) List B

- List A covers ownership and operation of public utilities. See Gamboa v. Teves, supra.
a. List A shall enumerate the areas of activities reserved to Philippine nationals by mandate of the Constitution and
specific laws.
b. List B shall contain the areas of activities and enterprises regulated pursuant to law:
1. Which are defense-related activities, requiring prior clearance and authorization from Department of National
Defense (DND) to engage in such activity, such as the manufacture, repair, storage and/or distribution of firearms,
ammunition, lethal weapons, military ordinances, explosives, pyrotechnics and similar materials, unless such
manufacturing on repair activity is specifically authorized, with a substantial export component, to a non-Philippine
national by the Secretary of National Defense; or

2. which have implications on public health and morals, such as the manufacture and distribution of dangerous drugs,
all forms of gambling, nightclubs, bars, beer houses, dance halls, sauna and steam bathhouses and massage
clinics.

Small and medium-sized domestic market enterprises with paid-in equity capital less than the equivalent of Two
hundred thousand US dollars (US$200,000.00), are reserved to Philippine nationals: provided, that if (1) they
involve advanced technology, or (2) they employ at least fifty (50) direct employees, then a minimum paid-in capital
of One hundred thousand US dollars (US$100,000.00) shall be allowed to non-Philippine nationals.

Amendments to List B may be made upon recommendation of the Secretary of National Defense, or the Secretary
of Health, or the Secretary of Education, Culture and Sports, indorsed by the NEDA, or upon recommendation motu
propio, of NEDA, approved by the President, and promulgated by a Presidential Proclamation.

The Transitory Foreign Investment Negative List established in Section 15 hereof shall be replaced at the end of the
transitory period by the first Regular Negative List to be formulated and recommended by NEDA, following the
process and criteria, provided in Sections 8 and 9 of this Act. The first Regular Negative Lists shall be published not
later than sixty (60) days before the end of the transitory period provided in said section and shall become
immediately effective at the end of the transitory period. Subsequent Foreign Investment Negative Lists shall
become effective fifteen (15) days after publication in a newspaper of general circulation in the Philippines: provided,
however, that each Foreign Investment Negative List shall be prospective in operation and shall in no way affect
foreign investment existing on the date of its publication.

Amendments to List B after promulgation and publication of the first Regular Foreign Investment Negative List at the
end of the transitory period shall not be made more often than once every two (2) years."

4. Investment Rights of Former Natural-Born Filipinos

- Sec. 9, FIA
- Investment right does not extend to: 1) exercise of a profession; 2) defense- related activities under
Sec.8; 3) Retail Trade Law; Security Agency Act; Small Scale Mining Law; Rice and Corn Indusrty Act; Cockpit
Operation and Management
For purposes of this Act, former natural born citizens of the Philippines shall have the same investment rights of a Philippine
citizen in Cooperatives under Republic Act No. 6938. Rural Banks under Republic Act No. 7353, Thrift Banks and Private
Development Banks under Republic Act No. 7906, and Financing Companies under Republic Act No. 5980.

These rights shall not extend to activities reserved by the Constitution, including (1) the exercise of profession, (2) in defense
related activities under Sec. 8 (b) hereof, unless specifically authorized by the Secretary of National Defense, and (3)
activities covered by Republic Act No. 1180 (Retail Trade Act), Republic Act No. 5487 (Security Agency Act). Republic Act No.
7076 (Small Scale Mining Act). Republic Act No. 3018, as amended (Rice and Corn Industry Act), and P.D. 449 (Cockpits
Operation and Management)

5. Other Rights of Natural Born Citizen pursuant to Art. XII, Sec. 8 of 1987 Constitution

- Sec. 10, FIA: Transferee of private land up to 5,000 square meters for urban land; 3 hectares for rural land.

Other Rights of Natural Born Citizen Pursuant to the Provisions of Article XII, Sec. 8 of the Constitution. – Any natural born
citizen who has the legal capacity to enter into a contract under Philippine laws may be a transferee of a private land up to a
maximum area of five thousand (5,000) square meters in the case of urban land or three (3) hectares in the case of rural land
to be used by him for business or other purposes. In the case of married couples, one of them may avail of the privilege
herein granted: provided, that if both shall avail of the same, the total area acquired shall not exceed the maximum herein
fixed.

In case the transferee already owns urban or rural land for business or other purposes, he shall still be entitled to be a
transferee of additional urban or rural land for business or other purposes which when added to those already owned by him
shall not exceed the maximum areas herein authorized.

A transferee under this Act may acquire not more than two (2) lots which should be situated in different municipalities or cities
anywhere in the Philippines: provided, that the total land area thereof shall not exceed five thousand (5,000) hectares in the
case of rural land for use by him for business or other purposes. A transferee who has already acquired urban land shall be
disqualified from acquiring rural land area and vice versa
C. Electronic Commerce Act of 2000 (R.A. No. 8792)
and A.M. No. 01-7-01-SC, Rules on Electronic Evidence

A. E-Commerce Act of 2000

1. Policy of the State

- Sec. 2, ECA
The State recognizes the vital role of information and communications technology (ICT) in nation-building; the need to create
an information-friendly environment which supports and ensures the availability, diversity and affordability of ICT
products and services; the primary responsibility of the private sector in contributing investments and services in
telecommunications and information technology; the need to develop, with appropriate training programs and institutional
policy changes, human resources for the information technology age, a labor force skilled in the use of ICT and a population
capable of operating and utilizing electronic appliances and computers; its obligation to facilitate the transfer
and promotion of adaptation technology, to ensure network security, connectivity and neutrality of technology for the national
benefit; and the need to marshal, organize and deploy national information infrastructures, comprising in both
telecommunications network and strategic information services, including their interconnection to the global information
networks, with the necessary and appropriate legal, financial, diplomatic and technical framework, systems and facilities.

2. Sphere of Application

- Sec. 4, ECA

Act shall apply to any kind of data message and electronic document used in the context of commercial and non-commercial
activities to include domestic and international dealings, transactions, arrangements, agreements, contracts and exchanges
and storage of information.

3. Definition of Terms

- Sec. 5, ECA
- NOTE: “Electronic Signature”, Sec. 5 (e)
“Electronic Document”,Sec. 5 (f)

e. “Electronic Signature” refers to any distinctive mark, characteristic and/or sound in electronic form, representing the identity
of a person and attached to or logically associated with the electronic data message or electronic document or any
methodology or procedures employed or adopted by a person and executed or adopted by such person with the intention of
authenticating or approving an electronic data message or electronic document.

f. “Electronic Document” refers to information or the representation of information, data, figures, symbols or other modes of
written expression, described or however represented, by which a right is established or an obligation extinguished, or by
which a fact may be proved and affirmed, which is received, recorded, transmitted, stored, processed, retrieved or produced
electronically.

4. Legal Recognition of Electronic Data Messages

- Sec. 6, ECA
- Does not include facsimile transmission. See MCC Industrial Sales Corp. v. Ssangyong Corp., GR No.
170633, October 17, 2007
- Best Evidence Rule

5. Legal Recognition of Electronic Documents

- Sec. 7, ECA
- Does not include facsimile transmission. MCC Industrial Sales Corp. v. Ssangyong Corp., ibid.
- For evidentiary purposes, an electronic document shall be the functional equavalent of a written
document
- Best Evidence Rule

Sec. 7. Legal Recognition of Electronic Documents. – Electronic documents shall have the legal effect, validity or
enforceability as any other document or legal writing, and -
(a) Where the law requires a document to be in writing, that requirement is met by an electronic document if the said
electronic document maintains its integrity and reliability and can be authenticated so as to be usable for subsequent
reference, in that -
(i) The electronic document has remained complete and unaltered, apart from the addition of any endorsement and
any authorized change, or any change which arises in the normal course of communication, storage and display;
and
(ii) The electronic document is reliable in the light of the purpose for which it was generated and in the light of all the
relevant circumstances.
(b) Paragraph (a) applies whether the requirement therein is in the form of an obligation or whether the law simply provides
consequences for the document not being presented or retained in its original form.
(c) Where the law requires that a document be presented or retained in its original form, that requirement is met by an
electronic document if -
(i) There exists a reliable assurance as to the integrity of the document from the time when it
was first generated in its final form; and
(ii) That document is capable of being displayed to the person to whom it is to be presented: Provided, That no
provision of this Act shall apply to vary any and all requirements of existing laws on formalities required in the
execution of documents for their validity.
For evidentiary purposes, an electronic document shall be the functional equivalent of a written document under
existing laws.

This Act does not modify any statutory rule relating to the admissibility of electronic data

6. Legal Recognition of Electronic Signatures

- Sec. 9, ECA

Sec. 9. Presumption Relating to Electronic Signatures. - In any proceedings involving an

electronic signature, it shall be presumed that -
(a) The electronic signature is the signature of the person to whom it correlates; and
(b) The electronic signature was affixed by that person with the intention of signing or approving the electronic document
unless the person relying on the electronically signed electronic document knows or has notice of defects in or unreliability of
the signature or reliance on the electronic signature is not reasonable under the circumstances.

7. Authentication of E-Data messages and E-Documents

- Sec. 11, ECA

SEC. 11. Authentication of Electronic Data Messages and Electronic Documents. - Until the Supreme Court by appropriate
rules shall have so provided, electronic documents, electronic data messages and electronic signatures, shall be
authenticated by demonstrating, substantiating and validating a claimed identity of a user, device, or another entity in an
information or communication system, among other ways, as follows:
(a) The electronic signature shall be authenticated by proof that a letter, character, number or other symbol in electronic form
representing the persons named in and attached to or logically associated with an electronic data message, electronic
document, or that the appropriate methodology or security procedures, when applicable, were employed or adopted by a
person and executed or adopted by such person, with the intention of authenticating or approving an
electronic data message or electronic document;
(b) The electronic data message and electronic document shall be authenticated by proof that an appropriate security
procedure, when applicable was adopted and employed for the purpose of verifying the originator of an electronic data
message and/or electronic document, or in detecting error or alteration in the communication, content or storage of an
electronic document or electronic data message from a specific point, which, using algorithm or codes, identifying words
or numbers, encryptions, answers back or acknowledgment procedures, or similar security devices.

The Supreme Court may adopt such other authentication procedures, including the use of electronic notarization systems as
necessary and advisable, as well as the certificate of authentication on printed or hard copies of the electronic document or
electronic data messages by electronic notaries, service providers and other duly recognized or appointed certification
authorities.
The person seeking to introduce an electronic data message and electronic document in any legal proceeding has the
burden of proving its authenticity by evidence capable of supporting a finding that the electronic data message and electronic
document is what the person claims it to be.

In the absence of evidence to the contrary, the integrity of the information and communication system in which an electronic
data message or electronic document is recorded or stored may be established in any legal proceeding -
(a) By evidence that at all material times the information and communication system or other similar device was operating in
a manner that did not affect the integrity of the electronic data message and/or electronic document, and there are no other
reasonable grounds to doubt the integrity of the information and communication system;

(b) By showing that the electronic data message and/or electronic document was recorded or stored by a party to the
proceedings who is adverse in interest to the party using it; or

(c) By showing that the electronic data message and/or electronic document was recorded or stored in the usual and ordinary
course of business by a person who is not a party to the proceedings and who did not act under the control of the party using
the record.

8. Admissibility and Evidential Weight of E-data message or E-Document

- Sec 12, ECA.

- No denial of admission in evidence: a) on sole ground that it is in electronic form; or b) that it is not in standard
written form.
- Facsimile transmission is not electronic evidence. MCC Industrial Sales Corp. v. Ssangyong Corp., supra.

SEC. 12. Admissibility and Evidential Weight of Electronic Data Message and Electronic Documents. - In any legal
proceedings, nothing in the application of the rules on evidence shall deny the admissibility of an electronic data message or
electronic document in evidence -
a. On the sole ground that it is in electronic form; or
b. On the ground that it is not in the standard written form and electronic data message or electronic document meeting, and
complying with the requirements under Sections 6 or 7 hereof shall be the best evidence of the agreement and transaction
contained therein.

In assessing the evidential weight of an electronic data message or electronic document, the reliability of the manner in which
it was generated, stored or communicated, the reliability of the manner in which its originator was identified, and other
relevant factors shall be given due regard.

9. Applicability to Carriage of Goods

- Sec. 25, ECA

- Sec. 26, ECA

SEC. 25. Actions Related to Contracts of Carriage of Goods. - Without derogating from the provisions of part two of this law,
this chapter applies to any action in connection with, or in pursuance of, a contract of carriage of goods, including but not
limited to:
(a)
(i) furnishing the marks, number, quantity or weight of goods;
(ii) stating or declaring the nature or value of goods;
(iii) issuing a receipt for goods;
(iv) confirming that goods have been loaded;

(b)
(i) notifying a person of terms and conditions of the contract;
(ii) giving instructions to a carrier;
(c)
(i) claiming delivery of goods;
(ii) authorizing release of goods;
(iii) giving notice of loss of, or damage to, goods;

(d) giving any other notice or statement in connection with the performance of the contract;

(e) undertaking to deliver goods to a named person or a person

(f) granting, acquiring, renouncing, surrendering, transferring or

negotiating rights in goods;

(g) acquiring or transferring rights and obligations under the contract.

SEC. 26. Transport Documents. - (1) Where the law requires that any action referred to contract of carriage of goods be
carried out in writing or by using a paper document, that requirement is met if the action is carried out by using one or more
data messages or electronic documents.
(2) Paragraph (1) applies whether the requirement therein is in the form of an obligation or whether the law simply provides
consequences for failing either to carry out the action in writing or to use a paper document.

(3) If a right is to be granted to, or an obligation is to be acquired by, one person and no other person, and if the law requires
that, in order to effect this, the right or obligation must be conveyed to that person by the transfer, or use of, a paper
document, that requirement is met if the right or obligation is conveyed by using one or more electronic data messages or
electronic documents unique;

(4) For the purposes of paragraph (3), the standard of reliability required shall be assessed in the light of the purpose for
which the right or obligation was conveyed and in the light of all the circumstances, including any relevant agreement.

(5) Where one or more data messages are used to effect any action in subparagraphs (f) and (g) of Section 25, no paper
document used to effect any such action is valid unless the use of electronic data message or electronic document has been
terminated and replaced by the use of paper documents. A paper document issued in these circumstances shall contain a
statement of such termination. The replacement of electronic data messages or electronic documents by paper documents
shall not affect the rights or obligations of the parties involved.

(6) If a rule of law is compulsorily applicable to a contract of carriage of goods which is in, or is evidenced by, a paper
document, that rule shall not be inapplicable to such a contract of carriage of goods which is evidenced by one or more
electronic data messages or electronic documents by reason of the fact that the contract is evidenced by such electronic data
messages or electronic documents instead of by a paper document.

B. A.M. No. 01-7-01-SC, or the Rules on Electronic Documents

- Vidallon-Magtolis v. Salud, A.M. No. CA-05-20-P, September 9, 2005

- National Power Corp. v. Codilla, Jr., GR No. 170491, April 4, 2007
D. Philippine Competition Act
(R.A. No. 10667)

1. Policy of the State

- Anti-Trust Statute
- Sec. 2, PCA: a) Enhance economic efficiency; b) Prevent undue economic concentration in markets; c)
penalize anti-competitive agreements, abuse of dominant position and anti-competitive mergers and acquisitions
(M&As)

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

(c) 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.

2. Definition of terms

- Sec. 4, PCA
- “Acquisition”; “Dominant Position”

(a) Acquisition refers to the purchase of securities or assets, through contract or other means, for the purpose of obtaining
control by:
(1) One (1) entity of the whole or part of another;
(2) Two (2) or more entities over another; or
(3) One (1) or more entities over one (1) or more entities;

xxx
xxx

(g) Dominant position refers to a position of economic strength that an entity or entities hold which makes it capable of
controlling the relevant market independently from any or a combination of the following: competitors, customers, suppliers,
or consumers;

3. Anti-Competitive Agreements

- Sec. 14, PCA

- Covers both horizontal and vertical agreements
- Prohibits price-fixing, bid-rigging, output limitations, market sharing or allocation and the like.

Sec. 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;

(c) 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.

4. Abuse of Dominant Position

- Sec. 15, PCA

- Presumption of Dominant Position if market share of entity is at least 50%
- Includes switching costs for consumers such as predatory pricing, imposing barriers to entry in anti-competitive
manner and unfair exercise of monopsony (one buyer/many sellers)

SEC. 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

(e) 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.

5. Mergers and Acquisitions (M&As)

- Sections 16-23, PCA

- Mergers/acquisitions that substantially prevent, restrict or lessen competition
- Prohibits elimination of “maverick” competitor

CHAPTER IV
MERGERS AND ACQUISITIONS

SEC. 16. Review of Mergers and Acquisitions. — The Commission shall have the power to review mergers and acquisitions
based on factors deemed relevant by the Commission.

SEC. 17. Compulsory Notification. – Parties to the merger or acquisition agreement referred to in the preceding section
wherein the value of the transaction exceeds one billion pesos (P1,000,000,000.00) are prohibited from consummating their
agreement until thirty (30) days after providing notification to the Commission in the form and containing the information
specified in the regulations issued by the Commission: Provided, That the Commission shall promulgate other criteria, such
as increased market share in the relevant market in excess of minimum thresholds, that may be applied specifically to a
sector, or across some or all sectors, in determining whether parties to a merger or acquisition shall notify the Commission
under this Chapter.

An agreement consummated in violation of this requirement to notify the Commission shall be considered void and subject
the parties to an administrative fine of one percent (1%) to five percent (5%) of the value of the transaction.

Should the Commission deem it necessary, it may request further information that are reasonably necessary and directly
relevant to the prohibition under Section 20 hereof from the parties to the agreement before the expiration of the thirty (30)-
day period referred. The issuance of such a request has the effect of extending the period within which the agreement may
not be consummated for an additional sixty (60) days, beginning on the day after the request for information is received by
the parties: Provided, That, in no case shall the total period for review by the Commission of the subject agreement exceed
ninety (90) days from initial notification by the parties.

When the above periods have expired and no decision has been promulgated for whatever reason, the merger or acquisition
shall be deemed approved and the parties may proceed to implement or consummate it. All notices, documents and
information provided to or emanating from the Commission under this section shall be subject to confidentiality rule under
Section 34 of this Act except when the release of information contained therein is with the consent of the notifying entity or is
mandatorily required to be disclosed by law or by a valid order of a court of competent jurisdiction, or of a government or
regulatory agency, including an exchange.

In the case of the merger or acquisition of banks, banking institutions, building and loan associations, trust companies,
insurance companies, public utilities, educational institutions and other special corporations governed by special laws, a
favorable or no-objection ruling by the Commission shall not be construed as dispensing of the requirement for a favorable
recommendation by the appropriate government agency under Section 79 of the Corporation Code of the Philippines.

A favorable recommendation by a governmental agency with a competition mandate shall give rise to a disputable
presumption that the proposed merger or acquisition is not violative of this Act.

SEC. 18. Effect of Notification. — If within the relevant periods stipulated in the preceding section, the Commission
determines that such agreement is prohibited under Section 20 and does not qualify for exemption under Section 21 of this
Chapter, the Commission may:

(a) Prohibit the implementation of the agreement;

(b) Prohibit the implementation of the agreement unless and until it is modified by changes specified by the
Commission.
(c) Prohibit the implementation of the agreement unless and until the pertinent party or parties enter into
legally enforceable agreements specified by the Commission.

SEC. 19. Notification Threshold. – The Commission shall, from time to time, adopt and publish regulations stipulating:
(a) The transaction value threshold and such other criteria subject to the notification requirement of Section 17 of this
Act;
(b) The information that must be supplied for notified merger or acquisition;
(c) Exceptions or exemptions from the notification requirement; and
(d) Other rules relating to the notification procedures.

SEC. 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.

SEC. 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.

SEC. 22. Burden of Proof. – The burden of proof under Section 21 lies with the parties seeking the exemption. A party
seeking to rely on the exemption specified in Section 21(a) must demonstrate that if the agreement were not implemented,
significant efficiency gains would not be realized.

SEC. 23. Finality of Ridings on Mergers and Acquisitions. – Merger or acquisition agreements that have received a favorable
ruling from the Commission, except when such ruling was obtained on the basis of fraud or false material information, may
not be challenged under this Act.

a. Prohibited M&As

- Sec. 20, PCA

b. Exemptions from Prohibited M&As

- Sec. 21, PCA

6. Control of an Entity

- Sec 25, PCA

SEC. 25. Control of an Entity. – In determining the control of an entity, the Commission may consider the following:
Control is presumed to exist when the parent owns directly or indirectly, through subsidiaries, more than one half (1/2) of the
voting power of an entity, unless in exceptional circumstances, it can clearly be demonstrated that such ownership does not
constitute control. Control also exists even when an entity owns one half (1/2) or less of the voting power of another entity
when:

(a) There is power over more than one half (1/2) of the voting rights by virtue of an agreement with investors;
(b) There is power to direct or govern the financial and operating policies of the entity under a statute or agreement;
 (c) There is power to appoint or remove the majority of the members of the board of directors or equivalent governing
body;
(d) There is power to cast the majority votes at meetings of the board of directors or equivalent governing body;
(e) There exists ownership over or the right to use all or a significant part of the assets of the entity;
(f) There exist rights or contracts which confer decisive influence on the decisions of the entity.

7. Market Dominant Position

- Sec 27, PCA

SEC. 27. Market Dominant Position. – In determining whether an entity has market dominant position for purposes of this Act,
the Commission shall consider the following:
(a) The share of the entity in the relevant market and whether it is able to fix prices unilaterally or to restrict supply in the
relevant market;
(b) The existence of barriers to entry and the elements which could foreseeably alter both said barriers and the supply
from competitors;
(c) The existence and power of its competitors;
(d) The possibility of access by its competitors or other entities to its sources of inputs;
(e) The power of its customers to switch to other goods or services;
(f) Its recent conducts; and
(g) Other criteria established by the regulations of this Act.

There shall be a rebuttable presumption of market dominant position if the market share of an entity in the relevant market is
at least fifty percent (50%), unless a new market share threshold is determined by the Commission for that particular sector.

The Commission shall from time to time determine and publish the threshold for dominant position or minimum level of share
in the relevant market that could give rise to a presumption of dominant position. In such determination, the Commission
would consider the structure of the relevant market, degree of integration, access to end-users, technology and financial
resources, and other factors affecting the control of a market, as provided in subsections (a) to (g) of this section.

The Commission shall not consider the acquiring, maintaining and increasing of market share through legitimate means not
substantially preventing, restricting, or lessening competition in the market such as but not limited to having superior skills,
rendering superior service, producing or distributing quality products, having business acumen, and the enjoyment and use of
protected intellectual property rights as violative of this Act.

8. Liabilities

- Only Anti-Competitive Agreements give rise to administrative, civil and criminal liabilities. See Sections 29,
30 and 45, PCA
- Abuse of Dominant Position and Anti-Competitive Mergers and Acquisitions give rise to administrative and
civil liabilities only. See Sections 29 and 30, PCA

Sec. 29. Administrative Penalties. –

(a) Administrative Fines. – In any investigation under Chapter III, Sections 14 and 15, and Chapter IV, Sections 17 and
20 of this Act, after due notice and hearing, the Commission may impose the following schedule of administrative
fines on any entity found to have violated the said sections:

(a) First offense: Fine of up to one hundred million pesos (P100,000,000.00);

(b) Second offense: Fine of not less than one hundred million pesos (P100,000,000.00) but not more than two hundred
fifty million pesos (P250,000,000.00).

(c) In fixing the amount of the fine, the Commission shall have regard to both the gravity and the duration of the
violation.

(b) Failure to Comply With an Order of the Commission. – An entity which fails or refuses to comply with a ruling, order
or decision issued by the Commission shall pay a penalty of not less than fifty thousand pesos (P50,000.00) up to
two million pesos (P2,000,000.00) for each violation and a similar amount of penalty for each day thereafter until the
said entity fully complies. Provided that these fines shall only accrue daily beginning forty-five (45) days from the
time that the said decision, order or ruling was received.

(c) Supply of Incorrect or Misleading Information. – The Commission may likewise impose upon any entity fines of up to
 one million pesos (PI,000,000.00) where, intentionally or negligently, they supply incorrect or misleading information
in any document, application or other paper filed with or submitted to the Commission or supply incorrect or
misleading information in an application for a binding ruling, a proposal for a consent judgment, proceedings relating
to a show cause order, or application for modification of the Commission’s ruling, order or approval, as the case may
be.

(d) Any other violations not specifically penalized under the relevant provisions of this Act shall be penalized by a fine of
not less than fifty thousand pesos (P50,000.00) up to two million pesos (P2,000,000.00).

Provided that the schedule of fines indicated in this section shall be increased by the Commission every five (5) years to
maintain their real value from the time it was set.

SEC. 30. Criminal Penalties. – An entity that enters into any anti-competitive agreement as covered by Chapter III, Section
14(a) and 14(b) under this Act shall, for each and every violation, be penalized by imprisonment from two (2) to seven (7)
years, and a fine of not less than fifty million pesos (P50,000,000.00) but not more than two hundred fifty million pesos
(P250,000,000.00). The penalty of imprisonment shall be imposed upon the responsible officers, and directors of the entity.
When the entities involved are juridical persons, the penalty of. imprisonment shall be imposed on its officers, directors, or
employees holding managerial positions, who are knowingly and willfully responsible for such violation.

Sec. 45. Private Action. – Any person who suffers direct injury by reason of any violation of this Act may institute a separate
and independent civil action after the Commission has completed the preliminary inquiry provided under Section 31.

9. No Injunction Rule

- Sec. 47, PCA

Sec. 47. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary Mandatory
Injunctions. — Except for the Court of Appeals and the Supreme Court, no other court shall issue any temporary restraining
order, preliminary injunction or preliminary mandatory injunction against the Commission in the exercise of its duties or
functions: Provided, That, this prohibition shall apply in all cases, disputes or controversies instituted by a private party,
including, but not limited to, cases filed by entities or those claiming to have rights through such entities: Provided,
however,That, this prohibition shall not apply when the matter is of extreme urgency involving a constitutional issue, such that
the non-issuance of a temporary restraining order will result in grave injustice and irreparable injury to the public: Provided,
further,  That, the applicant shall file a bond, in an amount to be fixed by the Court, but in no case shall it exceed twenty
percent (20%) of the imposable fines provided for under Chapter VI, Section 29 of this Act: Provided, finally, That in the event
that the court finally decides that the applicant was not entitled to the relief applied for, the bond shall accrue in favor of the
Commission.

Any temporary restraining order, preliminary injunction or preliminary mandatory injunction issued in violation of this section is
void and of no force and effect. Any judge who violates this section shall be penalized by suspension of at least one (1) year
without pay in addition to other criminal, civil or administrative penalties.
E. Financial Rehabilitation and Insolvency Act of 2010
(Rep. Act No. 10142)

1. Types of Rehabilitation Proceedings

a. Court-Supervised Rehabilitation

i. Voluntary Proceedings

- Sec. 12, FRIA - initiated by debtor

Section 12. Petition to Initiate Voluntary Proceedings by Debtor. - When approved by the owner in case of a sole
proprietorship, or by a majority of the partners in case of a partnership, or in case of a corporation, by a majority vote of the
board of directors or trustees and authorized by the vote of the stockholders representing at least two-thirds (2/3) of the
outstanding capital stock, or in case of nonstock corporation, by the vote of at least two-thirds (2/3) of the members, in a
stockholder's or member's meeting duly called for the purpose, an insolvent debtor may initiate voluntary proceedings under
this Act by filing a petition for rehabilitation with the court and on the grounds hereinafter specifically provided. The petition
shall be verified to establish the insolvency of the debtor and the viability of its rehabilitation, and include, whether as an
attachment or as part of the body of the petition, as a minimum the following:

(a) Identification of the debtor, its principal activities and its addresses;

(b) Statement of the fact of and the cause of the debtor's insolvency or inability to pay its obligations as they become due;

(c) The specific relief sought pursuant to this Act;

(d) The grounds upon which the petition is based;

(e) Other information that may be required under this Act depending on the form of relief requested;

(f) Schedule of the debtor's debts and liabilities including a list of creditors with their addresses, amounts of claims and
collaterals, or securities, if any;

(g) An inventory of all its assets including receivables and claims against third parties;

(h) A Rehabilitation Plan;

(i) The names of at least three (3) nominees to the position of rehabilitation receiver; and

(j) Other documents required to be filed with the petition pursuant to this Act and the rules of procedure as may be
promulgated by the Supreme Court.
A group of debtors may jointly file a petition for rehabilitation under this Act when one or more of its members foresee the
impossibility of meeting debts when they respectively fall due, and the financial distress would likely adversely affect the
financial condition and/or operations of the other members of the group and/or the participation of the other members of the
group is essential under the terms and conditions of the proposed Rehabilitation Plan.

ii. Involuntary Proceedings

- Sections 13 and 14, FRIA - initiated by creditor or group of creditors Note*** 69, 86, 64

Section 13. Circumstances Necessary to Initiate Involuntary Proceedings. - Any creditor or group of creditors with a claim of,
or the aggregate of whose claims is, at least One Million Pesos (Php1,000,000.00) or at least twenty-five percent (25%) of
the subscribed capital stock or partners' contributions, whichever is higher, may initiate involuntary proceedings against the
debtor by filing a petition for rehabilitation with the court if:

(a) there is no genuine issue of fact on law on the claim/s of the petitioner/s, and that the due and demandable payments
thereon have not been made for at least sixty (60) days or that the debtor has failed generally to meet its liabilities as they fall
due; or

(b) a creditor, other than the petitioner/s, has initiated foreclosure proceedings against the debtor that will prevent the debtor
from paying its debts as they become due or will render it insolvent.
Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition for rehabilitation shall be verified to establish
the substantial likelihood that the debtor may be rehabilitated, and include:

(a) identification of the debtor its principal activities and its address;

(b) the circumstances sufficient to support a petition to initiate involuntary rehabilitation proceedings under Section 13 of this
Act;

(c) the specific relief sought under this Act;

(d) a Rehabilitation Plan;

(e) the names of at least three (3) nominees to the position of rehabilitation receiver;

(f) other information that may be required under this Act depending on the form of relief requested; and

(g) other documents required to be filed with the petition pursuant to this Act and the rules of procedure as may be
promulgated by the Supreme Court.

b. Pre-Negotiated Rehabilitation

- Sec. 76, FRIA

Section 76. Petition by Debtor. - An insolvent debtor, by itself or jointly with any of its creditors, may file a verified petition with
the court for the approval of a pre-negotiated Rehabilitation Plan which has been endorsed or approved by creditors holding
at least two-thirds (2/3) of the total liabilities of the debtor, including secured creditors holding more than fifty percent (50%) of
the total secured claims of the debtor and unsecured creditors holding more than fifty percent (50%) of the total unsecured
claims of the debtor. The petition shall include as a minimum:

(a) a schedule of the debtor's debts and liabilities;

(b) an inventory of the debtor's assets;

(c) the pre-negotiated Rehabilitation Plan, including the names of at least three (3) qualified nominees for rehabilitation
receiver; and

(d) a summary of disputed claims against the debtor and a report on the provisioning of funds to account for appropriate
payments should any such claims be ruled valid or their amounts adjusted.

c. Out-of-Court or Informal Rehabilitation Agreement (OCRA)

- Sec. 83, FRIA

Section 83. Out-of-Court or Informal Restructuring Agreements and Rehabilitation Plans. - An out-of-court or informal
restructuring agreement or Rehabilitation Plan that meets the minimum requirements prescribed in this chapter is hereby
recognized as consistent with the objectives of this Act.

2. Commencement Order

- Includes a Stay Order. Sec. 16 (q), FRIA

Section 16. Commencement of Proceedings and Issuance of a Commencement Order. - The rehabilitation proceedings shall
commence upon the issuance of the Commencement Order, which shall:

xxx
xxx
xxx

(q) include s Stay or Suspension Order which shall:

(1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor;
(2) suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor;
(3) prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except
in the ordinary course of business; and
(4) prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except
 as may be provided herein.

- Issued within 5 days from filing of petition (Sec. 15, FRIA)

Section 15. Action on the Petition. - If the court finds the petition for rehabilitation to be sufficient in form and substance, it
shall, within five (5) working days from the filing of the petition, issue a Commencement Order. If, within the same period, the
court finds the petition deficient in form or substance, the court may, in its discretion, give the petitioner/s a reasonable period
of time within which to amend or supplement the petition, or to submit such documents as may be necessary or proper to put
the petition in proper order. In such case, the five (5) working days provided above for the issuance of the Commencement
Order shall be reckoned from the date of the filing of the amended or supplemental petition or the submission of such
documents.

- Rehabilitation proceedings commences from issuance of Commencement Order (Sec. 16, FRIA)

Section 16. Commencement of Proceedings and Issuance of a Commencement Order. - The rehabilitation proceedings shall
commence upon the issuance of the Commencement Order, which shall:

(a) identify the debtor, its principal business or activity/ies and its principal place of business;

(b) summarize the ground/s for initiating the proceedings;

(c) state the relief sought under this Act and any requirement or procedure particular to the relief sought;

(d) state the legal effects of the Commencement Order, including those mentioned in Section 17 hereof;

(e) declare that the debtor is under rehabilitation;

(f) direct the publication of the Commencement Order in a newspaper of general circulation in the Philippines once a week for
at least two (2) consecutive weeks, with the first publication to be made within seven (7) days from the time of its issuance;

(g) If the petitioner is the debtor direct the service by personal delivery of a copy of the petition on each creditor holding at
least ten percent (10%) of the total liabilities of the debtor as determined from the schedule attached to the petition within five
(5) days; if the petitioner/s is/are creditor/s, direct the service by personal delivery of a copy of the petition on the debtor
within five (5) days;

(h) appoint a rehabilitation receiver who may or not be from among the nominees of the petitioner/s and who shall exercise
such powers and duties defined in this Act as well as the procedural rules that the Supreme Court will promulgate;

(i) summarize the requirements and deadlines for creditors to establish their claims against the debtor and direct all creditors
to their claims with the court at least five (5) days before the initial hearing;

(j) direct Bureau of internal Revenue (BIR) to file and serve on the debtor its comment on or opposition to the petition or its
claim/s against the debtor under such procedures as the Supreme Court provide;

(k) prohibit the debtor's suppliers of goods or services from withholding the supply of goods and services in the ordinary
course of business for as long as the debtor makes payments for the services or goods supplied after the issuance of the
Commencement Order;

(l) authorize the payment of administrative expenses as they become due;

(m) set the case for initial hearing, which shall not be more than forty (40) days from the date of filing of the petition for the
purpose of determining whether there is substantial likelihood for the debtor to be rehabilitated;

(n) make available copies of the petition and rehabilitation plan for examination and copying by any interested party;

(o) indicate the location or locations at which documents regarding the debtor and the proceedings under Act may be
reviewed and copied;

(p) state that any creditor or debtor who is not the petitioner, may submit the name or nominate any other qualified person to
the position of rehabilitation receiver at least five (5) days before the initial hearing;

(q) include s Stay or Suspension Order which shall:

(1) suspend all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor;
(2) suspend all actions to enforce any judgment, attachment or other provisional remedies against the debtor;
 (3) prohibit the debtor from selling, encumbering, transferring or disposing in any manner any of its properties except
in the ordinary course of business; and
(4) prohibit the debtor from making any payment of its liabilities outstanding as of the commencement date except
as may be provided herein.

- On effects of Commencement Order, see Sec. 17, FRIA

Section 17. Effects of the Commencement Order. - Unless otherwise provided for in this Act, the court's issuance of a
Commencement Order shall, in addition to the effects of a Stay or Suspension Order described in Section 16 hereof:

(a) vest the rehabilitation with all the powers and functions provided for this Act, such as the right to review and obtain
records to which the debtor's management and directors have access, including bank accounts or whatever nature of the
debtor subject to the approval by the court of the performance bond filed by the rehabilitation receiver;

(b) prohibit or otherwise serve as the legal basis rendering null and void the results of any extrajudicial activity or process to
seize property, sell encumbered property, or otherwise attempt to collection or enforce a claim against the debtor after
commencement date unless otherwise allowed in this Act, subject to the provisions of Section 50 hereof;

(c) serve as the legal basis for rendering null and void any setoff after the commencement date of any debt owed to the
debtor by any of the debtor's creditors;

(d) serve as the legal basis for rendering null and void the perfection of any lien against the debtor's property after the
commencement date; and

(e) consolidate the resolution of all legal proceedings by and against the debtor to the court Provided. However, That the
court may allow the continuation of cases on other courts where the debtor had initiated the suit.

- On effectivity/duration of Commencement Order, see Sec. 21, FRIA

Section 21. Effectivity and Duration of Commencement Order. - Unless lifted by the court, the Commencement Order shall
be for the effective for the duration of the rehabilitation proceedings for as long as there is a substantial likelihood that the
debtor will be successfully rehabilitated. In determining whether there is substantial likelihood for the debtor to be
successfully rehabilitated, the court shall ensure that the following minimum requirements are met:

(a) The proposed Rehabilitation Plan submitted complies with the minimum contents prescribed by this Act;

(b) There is sufficient monitoring by the rehabilitation receiver of the debtor's business for the protection of creditors;
(c) The debtor has met with its creditors to the extent reasonably possible in attempts to reach consensus on the proposed
Rehabilitation Plan;

(d) The rehabilitation receiver submits a report, based on preliminary evaluation, stating that the underlying assumptions and
the goals stated in the petitioner's Rehabilitation Plan are realistic reasonable and reasonable or if not, there is, in any case,
a substantial likelihood for the debtor to be successfully rehabilitated because, among others:

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

(2) there is sufficient cash flow to maintain the operations of the debtor;
(3) the debtor's, partners, stockholders, directors and officers have been acting in good faith and which due
diligence;
(4) the petition is not s sham filing intended only to delay the enforcement of the rights of the creditor's or of any
group of creditors; and
(5) the debtor would likely be able to pursue a viable Rehabilitation Plan;

(e) The petition, the Rehabilitation Plan and the attachments thereto do not contain any materially false or misleading
statement;

(f) If the petitioner is the debtor, that the debtor has met with its creditor/s representing at least three-fourths (3/4) of its total
obligations to the extent reasonably possible and made a good faith effort to reach a consensus on the proposed
Rehabilitation Plan if the petitioner/s is/are a creditor or group of creditors, that/ the petitioner/s has/have met with the debtor
and made a good faith effort to reach a consensus on the proposed Rehabilitation Plan; and

(g) The debtor has not committed acts misrepresentation or in fraud of its creditor/s or a group of creditors.
 - On effect of failure to file a notice of claim by a non-listed creditor, see Sec. 23, FRIA
Section 23. Effect of Failure to File Notice of Claim. - A creditor whose claim is not listed in the schedule of debts and
liabilities and who fails to file a notice of claim in accordance with the Commencement Order but subsequently files a belated
claim shall not be entitled to participate in the rehabilitation proceedings but shall be entitled to receive distributions arising
therefrom.

- Court may rescind or nullify any sale, payment, transfer or conveyance of assets after commencement date. Sec.
52, FRIA

Section 52.Rescission or Nullity of Sale, Payment, Transfer or Conveyance of Assets.  - The court may rescind or declare as
null and void any sale, payment, transfer or conveyance of the debtor's unencumbered property or any encumbering thereof
by the debtor or its agents or representatives after the commencement date which are not in the ordinary course of the
business of the debtor: Provided, however,  That the unencumbered property may be sold, encumbered or otherwise
disposed of upon order of the court after notice and hearing:

(a) if such are in the interest of administering the debtor and facilitating the preparation and implementation of a
Rehabilitation Plan;

(b) in order to provide a substitute lien, mortgage or pledge of property under this Act;

(c) for payments made to meet administrative expenses as they arise;

(d) for payments to victims of quasi delicts upon a showing that the claim is valid and the debtor has insurance to reimburse
the debtor for the payments made;

(e) for payments made to repurchase property of the debtor that is auctioned off in a judicial or extrajudicial sale under. This
Act; or

(f) for payments made to reclaim property of the debtor held pursuant to a possessory lien.

- Court may likewise rescind or nullify certain pre-commencement transactions. Sec. 58, FRIA

Section 58.Rescission or Nullity of Certain Pre-commencement Transactions. Any transaction occurring prior to

commencement date entered into by the debtor or involving its funds or assets may be rescinded or declared null and void on
the ground that the same was executed with intent to defraud a creditor or creditors or which constitute undue preference of
creditors. Without limiting the generality of the foregoing, a disputable presumption of such design shall arise if the
transaction:

(a) provides unreasonably inadequate consideration to the debtor and is executed within ninety (90) days prior to the
commencement date;

(b) involves an accelerated payment of a claim to a creditor within ninety (90) days prior to the commencement date;

(c) provides security or additional security executed within ninety (90) days prior to the commencement date;

(d) involves creditors, where a creditor obtained, or received the benefit of, more than its pro rata share in the assets of the
debtor, executed at a time when the debtor was insolvent; or

(e) is intended to defeat, delay or hinder the ability of the creditors to collect claims where the effect of the transaction is to
put assets of the debtor beyond the reach of creditors or to otherwise prejudice the interests of creditors.

Provided, however,  That nothing in this section shall prevent the court from rescinding or declaring as null and void a
transaction on other grounds provided by relevant legislation and jurisprudence: Provided, further, That the provisions of the
Civil Code on rescission shall in any case apply to these transactions.

- Debtor may enter into post-commencement loans and obligations. Sec. 55, FRIA

Section 55.Post-commencement Loans and Obligations. - With the approval of the court upon the recommendation of the
rehabilitation receiver, the debtor, in order to enhance its rehabilitation. may:

(a) enter into credit arrangements; or

(b) enter into credit arrangements, secured by mortgages of its unencumbered property or secondary mortgages of
encumbered property with the approval of senior secured parties with regard to the encumbered property; or

(c) incur other obligations as may be essential for its rehabilitation.

The payment of the foregoing obligations shall be considered administrative expenses under this Act.

3. Rehabilitation Receiver

- Sec. 4 (hh), FRIA - on definition

(hh) Rehabilitation receiver shall refer to the person or persons, natural or juridical, appointed as such by the court pursuant
to this Act and which shall be entrusted with such powers and duties as set forth herein.

- On who may serve and qualifications, see Sections 28 and 29, FRIA

Section 28.Who May Serve as a Rehabilitation Receiver. - Any qualified natural or juridical person may serve as a
rehabilitation receiver: Provided, That if the rehabilitation receiver is a juridical entity, it must designate a natural person/s who
possess/es all the qualifications and none of the disqualification’s as its representative, it being understood that the juridical
entity and the representative/s are solidarily liable for all obligations and responsibilities of the rehabilitation receiver.

Section 29.Qualifications of a Rehabilitation Receiver. - The rehabilitation receiver shall have the following minimum
qualifications:

(a)A citizen of the Philippines or a resident of the Philippines in the six (6) months immediately preceding his nomination;

(b)Of good moral character and with acknowledged integrity, impartiality and independence;

(c)Has the requisite knowledge of insolvency and other relevant commercial laws, rules and procedures, as well as the
relevant training and/or experience that may be necessary to enable him to properly discharge the duties and obligations of a
rehabilitation receiver; and

(d)Has no conflict of interest: Provided, That such conflict of interest may be waived, expressly or impliedly, by a party who
may be prejudiced thereby.

Other qualifications and disqualifications of the rehabilitation receiver shall be set forth in procedural rules, taking into
consideration the nature of the business of the debtor and the need to protect the interest of all stakeholders concerned.

- Powers and Duties. Sec. 31, FRIA

Section 31.Powers, Duties and Responsibilities of the Rehabilitation Receiver. - The rehabilitation receiver shall be deemed
an officer of the court with the principal duty of preserving and maximizing the value of the assets of the debtor during the
rehabilitation proceedings, determining the viability of the rehabilitation of the debtor, preparing and recommending a
Rehabilitation Plan to the court, and implementing the approved Rehabilitation Plan, To this end, and without limiting the
generality of the foregoing, the rehabilitation receiver shall have the following powers, duties and responsibilities:

(a)To verify the accuracy of the factual allegations in the petition and its annexes;

(b)To verify and correct, if necessary, the inventory of all of the assets of the debtor, and their valuation;

(c)To verify and correct, if necessary, the schedule of debts and liabilities of the debtor;

(d)To evaluate the validity, genuineness and true amount of all the claims against the debtor;

(e)To take possession, custody and control, and to preserve the value of all the property of the debtor;

(f)To sue and recover, with the approval of the court, all amounts owed to, and all properties pertaining to the debtor;

(g)To have access to all information necessary, proper or relevant to the operations and business of the debtor and for its
rehabilitation;

(h) To sue and recover, with the. approval of the court, all property or money of the debtor paid, transferred or disbursed in
fraud of the debtor or its creditors, or which constitute undue preference of creditor/s;

(i) To monitor the operations and the business of the debtor to ensure that no payments or transfers of property are made
other than in the ordinary course of business;

(j) With the court's approval, to engage the services of or to employ persons or entities to assist him in the discharge of his
functions;

(k) To determine the manner by which the debtor may be best rehabilitated, to review) revise and/or recommend action on
the Rehabilitation Plan and submit the same or a new one to the court for approval;

(1) To implement the Rehabilitation Plan as approved by the court, if 80 provided under the Rehabilitation Plan;

(m) To assume and exercise the powers of management of the debtor, if directed by the court pursuant to Section 36 hereof;

(n) To exercise such other powers as may, from time to time, be conferred upon him by the court; and

To submit a status report on the rehabilitation proceedings every quarter or as may be required by the court motu proprio.  or
upon motion of any creditor. or as may be provided, in the Rehabilitation Plan.
Unless appointed by the court, pursuant to Section 36 hereof, the rehabilitation receiver shall not take over the management
and control of the debtor but may recommend the appointment of a management committee over the debtor in the cases
provided by this Act.

- Removal. Sec. 32, FRIA

Section 32.Removal of the Rehabilitation Receiver. – The rehabilitation receiver may be removed at any time by the court
either motu proprio  or upon motion by any creditor/s holding more than fifty percent (50%) of the total obligations of the
debtor, on such grounds as the rules of procedure may provide which shall include, but are not limited to, the following:

(a) Incompetence, gross negligence, failure to perform or failure to exercise the proper degree of care in the performance of
his duties and powers;

(b) Lack of a particular or specialized competency required by the specific case;

(c) Illegal acts or conduct in the performance of his duties and powers;

(d) Lack of qualification or presence of any disqualification;

(e) Conflict of interest that arises after his appointment; and

(f) Manifest lack of independence that is detrimental to the general body of the stakeholders.

- Court may appoint Receiver to assume powers of management of debtor upon motion of interested party.
Sec. 36, FRIA

Section 36.Displacement of Existing Management by the Rehabilitation Receiver or Management Committee. – Upon

motion of any interested party, the court may appoint and direct the rehabilitation receiver to assume the powers of
management of the debtor, or appoint a management committee that will undertake the management of the debtor. upon
clear and convincing evidence of any of the following circumstances:

(a) Actual or imminent danger of dissipation, loss, wastage or destruction of the debtor’s assets or other properties;

(b) Paralyzation of the business operations of the debtor; or

(c) Gross mismanagement of the debtor. or fraud or other wrongful conduct on the part of, or gross or willful violation of this
Act by. existing management of the debtor Or the owner, partner, director, officer or representative/s in management of the
debtor.

In case the court appoints the rehabilitation receiver to assume the powers of management of the debtor. the court may:

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

(2) authorize him to engage the services or to employ persona or entities to assist him in the discharge of his managerial
functions; and
(3) authorize a commensurate increase in his compensation.

- Umale v. ASB Realty Corp., GR No. 181126, June 15, 2011

4. Management Committee (MANCOM)

- REQUISITES: Upon clear and convincing evidence of ANY of the following: (1) Actual or imminent danger or
dissipation, loss, wastage or destruction of debtor's assets or other properties; (2) Paralyzation of the business
operations of debtor; or (3) Gross mismanagement of debtor, or fraud or other wrongful conduct on the part of, or
gross or willful violation of FRIA by existing management of debtor or owner, director, officer or representatives/s in
management of debotr (Sec. 36, FRIA)
- Role of MANCOM. Sec. 37, FRIA

Section 37.Role of the Management Committee.  – When appointed pursuant to the foregoing section, the management
committee shall take the place of the management and the governing body of the debtor and assume their rights and
responsibilities.

The specific powers and duties of the management committee, whose members shall be considered as officers of the court,
shall be prescribed by the procedural rules.

- Conflict of Interest. Sec. 40, FRIA

Section 40.Conflict of Interest.  - No person may be appointed as a rehabilitation receiver, member of a_ management
committee, or be employed by the rehabilitation receiver or the management committee if he has a conflict of interest.

An individual shall be deemed to have a conflict of interest if he is so situated as to be materially influenced in the exercise of
his judgment for or against any party to the proceedings. Without limiting the generality of the foregoing, an individual shall be
deemed to have a conflict of interest if:

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

(b) he is engaged in a line of business which competes with that of the debtor;

(c) he is, or was, within five (5) years from the filing of the petition, a director, officer, owner, partner or employee of the
debtor or any of the creditors, or the auditor or accountant of the debtor;

(d) he is, or was, within two (2) years from the filing of the petition, an underwriter of the outstanding securities of the debtor;

(e) he is related by consanguinity or affinity within the fourth civil degree to any individual creditor, owners of a sale
proprietorship-debtor, partners of a partnership- debtor or to any stockholder, director, officer, employee or underwriter of a
corporation-debtor; or

(f) he has any other direct or indirect material interest in the debtor or any of the creditors.

Any rehabilitation receiver, member of the management committee or persons employed or contracted by them possessing
any conflict of interest shall make the appropriate disclosure either to the court or to the creditors in case of out-of-court
rehabilitation proceedings. Any party to the proceeding adversely affected by the appointment of any person with a conflict of
interest to any of the positions enumerated above may however waive his right to object to such appointment and, if the
waiver is unreasonably withheld, the court may disregard the conflict of interest, taking into account the general interest of the
stakeholders.

5. Rehabilitation Plan

- Sec. 4 (ii), FRIA – on definition

(ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and viability of an insolvent debtor can be
restored using various means including, but not limited to, debt forgiveness, debt rescheduling, reorganization or quasi-
reorganization, dacion en pago, debt-equity conversion and sale of the business (or parts of it) as a going concern, or 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.
 - Sec. 62, FRIA - on contents of Rehabilitation Plan
- Rehabilitation Plan must meet: 1) ECONOMIC FEASIBILITY TEST, and 2) PRESENT VALUE RECOVERY TEST
(Viva Shipping Lines, Inc. v. Keppel Phil. Mining, Inc. etc., GR No. 177382, February 17, 2016)

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

(a) specify the underlying assumptions, the financial goals and the procedures proposed to accomplish such goals;

(b) compare the amounts expected to be received by the creditors under the Rehabilitation Plan with those that they will
receive if liquidation ensues within the next one hundred twenty (120) days;

(c) contain information sufficient to give the various classes of creditors a reasonable basis for determining whether
supporting the Plan is in their financial interest when compared to the immediate liquidation of the debtor, including any
reduction of principal interest and penalties payable to the creditors;

(d) establish classes of voting creditors;

(e) establish subclasses of voting creditors if prior approval has been granted by the court;

(f) indicate how the insolvent debtor will be rehabilitated including, but not limited to, debt forgiveness, debt rescheduling,
reorganization or quasi-reorganization. dacion en pago,  debt-equity conversion and sale of the business (or parts of it) as a
going concern, or setting-up of a new business entity or other similar arrangements as may be necessary to restore the
financial well-being and visibility of the insolvent debtor;

(g) specify the treatment of each class or subclass described in subsections (d) and (e);

(h) provide for equal treatment of all claims within the same class or subclass, unless a particular creditor voluntarily agrees
to less favorable treatment;

(i) ensure that the payments made under the plan follow the priority established under the provisions of the Civil Code on
concurrence and preference of credits and other applicable laws;

(j) maintain the security interest of secured creditors and preserve the liquidation value of the security unless such has been
waived or modified voluntarily;

(k) disclose all payments to creditors for pre-commencement debts made during the proceedings and the justifications
thereof;

(1) describe the disputed claims and the provisioning of funds to account for appropriate payments should the claim be ruled
valid or its amount adjusted;

(m) identify the debtor's role in the implementation of the Plan;

(n) state any rehabilitation covenants of the debtor, the breach of which shall be considered a material breach of the Plan;

(o) identify those responsible for the future management of the debtor and the supervision and implementation of the Plan,
their affiliation with the debtor and their remuneration;

(p) address the treatment of claims arising after the confirmation of the Rehabilitation Plan;

(q) require the debtor and its counter-parties to adhere to the terms of all contracts that the debtor has chosen to confirm;

(r) arrange for the payment of all outstanding administrative expenses as a condition to the Plan's approval unless such
condition has been waived in writing by the creditors concerned;

(s) arrange for the payment" of all outstanding taxes and assessments, or an adjusted amount pursuant to a compromise
settlement with the BlR Or other applicable tax authorities;

(t) include a certified copy of a certificate of tax clearance or evidence of a compromise settlement with the BIR;

(u) include a valid and binding r(,solution of a meeting of the debtor's stockholders to increase the shares by the required
amount in cases where the Plan contemplates an additional issuance of shares by the debtor;
(v) state the compensation and status, if any, of the rehabilitation receiver after the approval of the Plan; and

(w) contain provisions for conciliation and/or mediation as a prerequisite to court assistance or intervention in the event of any
disagreement in the interpretation or implementation of the Rehabilitation Plan.

6. Cram Down Effect

a. Court-Supervised Rehabilitation

- Court may confirm Rehabilitation Plan notwithstanding rejection thereof by creditors (BPI v. Sarabia Manor Hotel,
GR No. 175844, July 29, 2013; Sec. 64, FRIA)

Section 64.Creditor Approval of Rehabilitation Plan.  – The rehabilitation receiver shall notify the creditors and stakeholders
that the Plan is ready for their examination. Within twenty (2Q) days from the said notification, the rehabilitation receiver shall
convene the creditors, either as a whole or per class, for purposes of voting on the approval of the Plan. The Plan shall be
deemed rejected unless approved by all classes of creditors w hose rights are adversely modified or affected by the Plan. For
purposes of this section, the Plan is deemed to have been approved by a class of creditors if members of the said class
holding more than fifty percent (50%) of the total claims of the said class vote in favor of the Plan. The votes of the creditors
shall be based solely on the amount of their respective claims based on the registry of claims submitted by the rehabilitation
receiver pursuant to Section 44 hereof.

Notwithstanding the rejection of the Rehabilitation Plan, the court may confirm the Rehabilitation Plan if all of the following
circumstances are present:

(a)The Rehabilitation Plan complies with the requirements specified in this Act.

(b) The rehabilitation receiver recommends the confirmation of the Rehabilitation Plan;

(c) The shareholders, owners or partners of the juridical debtor lose at least their controlling interest as a result of the
Rehabilitation Plan; and

(d) The Rehabilitation Plan would likely provide the objecting class of creditors with compensation which has a net present
value greater than that which they would have received if the debtor were under liquidation.

- Once confirmed, Rehabilitation Plan binds debtor/all persons, including creditors whether or not such
persons participated or opposed Plan or whether or not claims are scheduled (Sec. 69, FRIA)

Section 69.Effect of Confirmation of the Rehabilitation Plan,  - The confirmation of the Rehabilitation Plan by the court shall
result in the following:

(a) The Rehabilitation Plan and its provisions shall be binding upon the debtor and all persons who may be affected by . it,
including the creditors, whether or not such persons have participated in the proceedings or opposed the Rehabilitation Plan
or whether or not their claims have been scheduled;

(b) The debtor shall comply with the provisions of the Rehabilitation Plan and shall take all actions necessary to carry out the
Plan;

(c) Payments shall be made to the creditors in accordance with the provisions of the Rehabilitation Plan;

(d) Contracts and other arrangements between the debtor and its creditors shall be interpreted as continuing to apply to the
extent that they do not conflict with the provisions of the Rehabilitation Plan;

(e) Any compromises on amounts or rescheduling of timing of payments by the debtor shall be binding on creditors
regardless of whether or not the Plan is successfully implement; and

(f) Claims arising after approval of the Plan that are otherwise not treated by the Plan are not subject to any Suspension
Order.

The Order confirming the Plan shall comply with Rules 36 of the Rules of Court: Provided, however, That the court may
maintain jurisdiction over the case in order to resolve claims against the debtor that remain contested and allegations that the
debtor has breached the Plan.
 b. Pre-Negotiated Rehabilitation

- Approval has same effects as confirmation (Sec. 82, FRIA)

Section 82. Effect of Approval. - Approval of a Plan under this chapter shall have the same legal effect as confirmation of a
Plan under Chapter II of this Act.

c. Out-of-Court or Informal Restructuring Agreements (OCRA)

- Cram Down provision in Sec. 69 applies (Sec. 86, FRIA)

Section 86. Cram Down Effect. - A restructuring/workout agreement or Rehabilitation Plan that is approved pursuant to an
informal workout framework referred to in this chapter shall have the same legal effect as confirmation of a Plan under
Section 69 hereof. The notice of the Rehabilitation Plan or restructuring agreement or Plan shall be published once a week
for at least three (3) consecutive weeks in a newspaper of general circulation in the Philippines. The Rehabilitation Plan or
restructuring agreement shall take effect upon the lapse of fifteen (15) days from the date of the last publication of the notice
thereof.

7. Stay or Suspension Order

a. Effects

1. Suspends all actions or proceedings, in court or otherwise, for enforcement of claims against debtor;
2. Suspends all actions to enforce judgment, attachment or provisional remedies against debtor;
3. Prohibits debtor from selling, encumbering, transfeering or disposing properties except in ordinary course of
business; and
4. Prohibits debtor from paying liabilities outstanding as of commencement date (Sec. 16 [q], FRIA)

b. Suspended Claims

- all claims or demands of whatever nature against debtor or his property, for money or otherwise, liquidated or
unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, including 1) all claims of government
whether national or local including taxes, tariffs and customs duties, and 2) claims against directors/officers
arising from acts done in the discharge of functions within scope of authority (Sec, 3 FRIA)

- PAL v. Kurangking and Dianalan, GR No. 146698, September 24, 2002

- Lingkod Manggagawa Sa Rubberworld v. Rubberworld (Phil.) Inc., GR No. 153882, January 29, 2007
- Sobrejuanite v. ASB Dev. Corp., GR No. 165675, September 30, 2005

Section 3. Nature of Proceedings. - The proceedings under this Act shall be in rem. Jurisdiction over all persons affected by
the proceedings shall be considered as acquired upon publication of the notice of the commencement of the proceedings in
any newspaper of general circulation in the Philippines in the manner prescribed by the rules of procedure to be promulgated
by the Supreme Court.

The proceedings shall be conducted in a summary and non-adversarial manner consistent with the declared policies of this
Act and in accordance with the rules of procedure that the Supreme Court may promulgate.

c. Preferred Status of Secured Creditor is Maintained

- BUT ENFORCEMENT OF PREFERENCE IS SUSPENDED. Upon final liquidation, secured and preferred
credits under the Civil Code will have preference over unsecured ones (Metrobank v. ASB Holdings, Inc., GR No.
166197, February 27, 2007)
- Since enforcement of claims and preference are merely suspended, the NON-IMPAIRMENT OF
CONTRACTS CLAUSE under the Constitution IS NOT VIOLATED (PNB v. Court of Appeals, GR No. 165571,
January 20, 2009)

d. Principle of Equality in Equity or Pari Passu as to Creditors

 - All creditors stand on equal footing. Not anyone of them should be given preference by paying one or some
of them ahead of others. Pari passu is used especially of creditors who, in marshalling assets, are entitled to
receive out of the same fund without any precedence over each other (Express Investments III
Private Ltd. and Export Development of Canada v. Dayan Telecommunications, Inc. etc., GR Nos. 174457-59 and
companion cases, December 12, 2012)
- During rehabilitation, the assets of the distressed corporation are held in trust for the equal benefit of all
creditors to preclude one from obtaining an advantage or preference over another (Export Investment III Case, supra.)

e. Exceptions to Stay/Suspension Order

- Sec. 18, FRIA

- JAPRL Dev. Corp. v. Security Bank Corp., GR No. 190107, June 6, 2011
- Panlilio, et al. v. RTC, etc., GR No. 173846, February 2, 2011

Section 18. Exceptions to the Stay or Suspension Order. - The Stay or Suspension Order shall not apply:

(a) to cases already pending appeal in the Supreme Court as of commencement date Provided, That any final and executory
judgment arising from such appeal shall be referred to the court for appropriate action;

(b) subject to the discretion of the court, to cases pending or filed at a specialized court or quasi-judicial agency which, upon
determination by the court is capable of resolving the claim more quickly, fairly and efficiently than the court:  Provided, That
any final and executory judgment of such court or agency shall be referred to the court and shall be treated as a non-disputed
claim;

(c) to the enforcement of claims against sureties and other persons solidarily liable with the debtor, and third party or
accommodation mortgagors as well as issuers of letters of credit, unless the property subject of the third party or
accommodation mortgage is necessary for the rehabilitation of the debtor as determined by the court upon recommendation
by the rehabilitation receiver;

(d) to any form of action of customers or clients of a securities market participant to recover or otherwise claim moneys and
securities entrusted to the latter in the ordinary course of the latter's business as well as any action of such securities market
participant or the appropriate regulatory agency or self-regulatory organization to pay or settle such claims or liabilities;

(e) to the actions of a licensed broker or dealer to sell pledged securities of a debtor pursuant to a securities pledge or margin
agreement for the settlement of securities transactions in accordance with the provisions of the Securities Regulation Code
and its implementing rules and regulations;

(f) the clearing and settlement of financial transactions through the facilities of a clearing agency or similar entities duly
authorized, registered and/or recognized by the appropriate regulatory agency like the Bangko Sentral ng Pilipinas (BSP) and
the SEC as well as any form of actions of such agencies or entities to reimburse themselves for any transactions settled for
the debtor; and

(g) any criminal action against individual debtor or owner, partner, director or officer of a debtor shall not be affected by any
proceeding commend under this Act.

8. Liquidation

a. Kinds of Debtors

i. Juridical Debtors

1) Voluntary Liquidation

- Sec. 90, FRIA

Section 90. Voluntary Liquidation. - An insolvent debtor may apply for liquidation by filing a petition for liquidation with the
court. The petition shall be verified, shall establish the insolvency of the debtor and shall contain, whether as an attachment
or as part of the body of the petition;

(a) a schedule of the debtor's debts and liabilities including a list of creditors with their addresses, amounts of claims and
collaterals, or securities, if any;

(b) an inventory of all its assets including receivables and claims against third parties; and

(c) the names of at least three (3) nominees to the position of liquidator.
At any time during the pendency of court-supervised or pre-negotiated rehabilitation proceedings, the debtor may also initiate
liquidation proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert the
rehabilitation proceedings into liquidation proceedings. The motion shall be verified, shall contain or set forth the same
matters required in the preceding paragraph, and state that the debtor is seeking immediate dissolution and termination of its
corporate existence.

If the petition or the motion, as the case may be, is sufficient in form and substance, the court shall issue a Liquidation Order
mentioned in Section 112 hereof.

2) Involuntary Liquidation

- Sec. 91, FRIA

Section 91. Involuntary Liquidation. - Three (3) or more creditors the aggregate of whose claims is at least either One million
pesos (Php1,000,000,00) or at least twenty-five percent (25%0 of the subscribed capital stock or partner's contributions of
the debtor, whichever is higher, may apply for and seek the liquidation of an insolvent debtor by filing a petition for liquidation
of the debtor with the court. The petition shall show that:

(a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and that the due and demandable payments
thereon have not been made for at least one hundred eighty (180) days or that the debtor has failed generally to meet its
liabilities as they fall due; and

(b) there is no substantial likelihood that the debtor may be rehabilitated.

At any time during the pendency of or after a rehabilitation court-supervised or pre-negotiated rehabilitation proceedings,
three (3) or more creditors whose claims is at least either One million pesos (Php1,000,000.00) or at least twenty-five percent
(25%) of the subscribed capital or partner's contributions of the debtor, whichever is higher, may also initiate liquidation
proceedings by filing a motion in the same court where the rehabilitation proceedings are pending to convert the rehabilitation
proceedings into liquidation proceedings. The motion shall be verified, shall contain or set forth the same matters required in
the preceding paragraph, and state that the movants are seeking the immediate liquidation of the debtor.
If the petition or motion is sufficient in form and substance, the court shall issue an Order:

(1) directing the publication of the petition or motion in a newspaper of general circulation once a week for two (2)
consecutive weeks; and

(2) directing the debtor and all creditors who are not the petitioners to file their comment on the petition or motion
within fifteen (15) days from the date of last publication.

If, after considering the comments filed, the court determines that the petition or motion is meritorious, it shall issue the
Liquidation Order mentioned in Section 112 hereof.

ii. Individual Debtors

1. Suspension of Payments

- Chapter VI (A), FRIA

- Commenced via Verified Petition. Sec. 94, FRIA

Section 94. Petition. - An individual debtor who, possessing sufficient property to cover all his debts but foreseeing the
impossibility of meeting them when they respectively fall due, may file a verified petition that he be declared in the state of
suspension of payments by the court of the province or city in which he has resides for six (6) months prior to the filing of his
petition. He shall attach to his petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory of assess; and
(c) a proposed agreement with his creditors.

2. Voluntary Liquidation

- Chapter VI (B), FRIA

- Application by debtor with debts exceedings PhP500,000. Sec. 103, FRIA
Section 103. Application. - An individual debtor whose properties are not sufficient to cover his liabilities, and owing debts
exceeding Five hundred thousand pesos (Php500,000.00), may apply to be discharged from his debts and liabilities by filing
a verified petition with the court of the province or city in which he has resided for six (6) months prior to the filing of such
petition. He shall attach to his petition a schedule of debts and liabilities and an inventory of assets. The filing of such petition
shall be an act of insolvency.

3. Involuntary Liquidation

- Chapter VI (C), FRIA

- Via Verified petition by creditor or group of creditors with claims aggregating PhP500,000. Sec. 105, FRIA

Section 105. Petition; Acts of Insolvency. - Any creditor or group of creditors with a claim of, or with claims aggregating at
least Five hundred thousand pesos (Php500, 000.00) may file a verified petition for liquidation with the court of the province
or city in which the individual debtor resides.

The following shall be considered acts of insolvency, and the petition for liquidation shall set forth or allege at least one of
such acts:

(a) That such person is about to depart or has departed from the Republic of the Philippines, with intent to defraud his
creditors;

(b) That being absent from the Republic of the Philippines, with intent to defraud his creditors, he remains absent;

(c) That he conceals himself to avoid the service of legal process for the purpose of hindering or delaying the liquidation or of
defrauding his creditors;

(d) That he conceals, or is removing, any of his property to avoid its being attached or taken on legal process;

(e) That he has suffered his property to remain under attachment or legal process for three (3) days for the purpose of
hindering or delaying the liquidation or of defrauding his creditors;

(f) That he has confessed or offered to allow judgment in favor of any creditor or claimant for the purpose of hindering or
delaying the liquidation or of defrauding any creditors or claimant;

(g) That he has willfully suffered judgment to be taken against him by default for the purpose of hindering or delaying the
liquidation or of defrauding his creditors;

(h) That he has suffered or procured his property to be taken on legal process with intent to give a preference to one or more
of his creditors and thereby hinder or delay the liquidation or defraud any one of his creditors;

(i) That he has made any assignment, gift, sale, conveyance or transfer of his estate, property, rights or credits with intent to
hinder or delay the liquidation or defraud his creditors;

(j) That he has, in contemplation of insolvency, made any payment, gift, grant, sale, conveyance or transfer of his estate,
property, rights or credits;

(k) That being a merchant or tradesman, he has generally defaulted in the payment of his current obligations for a period of
thirty (30) days;

(l) That for a period of thirty (30) days, he has failed, after demand, to pay any moneys deposited with him or received by him
in a fiduciary; and

(m) That an execution having been issued against him on final judgment for money, he shall have been found to be without
sufficient property subject to execution to satisfy the judgment.

The petitioning creditor/s shall post a bond in such as the court shall direct, conditioned that if the petition for liquidation is
dismissed by the court, or withdrawn by the petitioner, or if the debtor shall not be declared an insolvent the petitioners will
pay to the debtor all costs, expenses, damages occasioned by the proceedings and attorney's fees.

b. Procedure
 i. Conversion of Rehabilitation Proceedings to Liquidation Proceedings

- Sec. 92, FRIA

- Viva Shipping Lines, Inc. v. Keppel Phil. Mining, Inc. etc., supra.

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.

ii. Liquidation Order

- Sec. 112, FRIA

Section 112. Liquidation Order. - The Liquidation Order shall:

(a) declare the debtor insolvent;

(b) order the liquidation of the debtor and, in the case of a juridical debtor, declare it as dissolved;

(c) order the sheriff to take possession and control of all the property of the debtor, except those that may be exempt from
execution;

(d) order the publication of the petition or motion in a newspaper of general circulation once a week for two (2) consecutive
weeks;

(e) direct payments of any claims and conveyance of any property due the debtor to the liquidator;

(f) prohibit payments by the debtor and the transfer of any property by the debtor;

(g) direct all creditors to file their claims with the liquidator within the period set by the rules of procedure;

(h) authorize the payment of administrative expenses as they become due;

(i) state that the debtor and creditors who are not petitioner/s may submit the names of other nominees to the position of
liquidator; and

(j) set the case for hearing for the election and appointment of the liquidator, which date shall not be less than thirty (30) days
nor more than forty-five (45) days from the date of the last publication.

iii. Effects of Liquidation Order

- Sec. 113, FRIA

Section 113. Effects of the Liquidation Order. - Upon the issuance of the Liquidation Order:

(a) the juridical debtor shall be deemed dissolved and its corporate or juridical existence terminated;

(b) legal title to and control of all the assets of the debtor, except those that may be exempt from execution, shall be deemed
vested in the liquidator or, pending his election or appointment, with the court;

(c) all contracts of the debtor shall be deemed terminated and/or breached, unless the liquidator, within ninety (90) days from
the date of his assumption of office, declares otherwise and the contracting party agrees;

(d) no separate action for the collection of an unsecured claim shall be allowed. Such actions already pending will be
transferred to the Liquidator for him to accept and settle or contest. If the liquidator contests or disputes the claim, the court
shall allow, hear and resolve such contest except when the case is already on appeal. In such a case, the suit may proceed
to judgment, and any final and executor judgment therein for a claim against the debtor shall be filed and allowed in court;
and

(e) no foreclosure proceeding shall be allowed for a period of one hundred eighty (180) days.
 iv. Rights of Secured Creditors

- Liquidation Order does affect right of secured creditor to enforce his lien. Sec. 114, FRIA.

Section 114. Rights of Secured Creditors. - The Liquidation Order shall not affect the right of a secured creditor to enforce
his lien in accordance with the applicable contract or law. A secured creditor may:

(a) waive his right under the security or lien, prove his claim in the liquidation proceedings and share in the distribution of the
assets of the debtor; or

(b) maintain his rights under the security or lien:

If the secured creditor maintains his rights under the security or lien:

(1) the value of the property may be fixed in a manner agreed upon by the creditor and the liquidator. When the
value of the property is less than the claim it secures, the liquidator may convey the property to the secured creditor
and the latter will be admitted in the liquidation proceedings as a creditor for the balance. If its value exceeds the
claim secured, the liquidator may convey the property to the creditor and waive the debtor's right of redemption upon
receiving the excess from the creditor;

(2) the liquidator may sell the property and satisfy the secured creditor's entire claim from the proceeds of the sale;
or

(3) the secure creditor may enforce the lien or foreclose on the property pursuant to applicable laws.

v. Powers, Duties and Responsibilities of the Liquidator

- Sec. 119, FRIA

Section 119. Powers, Duties and Responsibilities of the Liquidator. - The liquidator shall be deemed an officer of the court
with the principal duly of preserving and maximizing the value and recovering the assets of the debtor, with the end of
liquidating them and discharging to the extent possible all the claims against the debtor. The powers, duties and
responsibilities of the liquidator shall include, but not limited to:

(a) to sue and recover all the assets, debts and claims, belonging or due to the debtor;

(b) to take possession of all the property of the debtor except property exempt by law from execution;

(c) to sell, with the approval of the court, any property of the debtor which has come into his possession or control;

(d) to redeem all mortgages and pledges, and so satisfy any judgement which may be an encumbrance on any property sold
by him;

(e) to settle all accounts between the debtor and his creditors, subject to the approval of the court;

(f) to recover any property or its value, fraudulently conveyed by the debtor;

(g) to recommend to the court the creation of a creditors' committee which will assist him in the discharge of the functions and
which shall have powers as the court deems just, reasonable and necessary; and

(h) upon approval of the court, to engage such professional as may be necessary and reasonable to assist him in the
discharge of his duties.

In addition to the rights and duties of a rehabilitation receiver, the liquidator, shall have the right and duty to take all
reasonable steps to manage and dispose of the debtor's assets with a view towards maximizing the proceedings therefrom,
to pay creditors and stockholders, and to terminate the debtor's legal existence. Other duties of the liquidator in accordance
with this section may be established by procedural rules.

A liquidator shall be subject to removal pursuant to procedures for removing a rehabilitation receiver.

vi. Determination of Claims

 - Chapter VII (C), FRIA
- Right of Set-off. Sec. 124, FRIA

Section 124. Right of Set-off. - If the debtor and creditor are mutually debtor and creditor of each other one debt shall be set
off against the other, and only the balance, if any shall be allowed in the liquidation proceedings.

vii. Avoidance Proceedings

- Chapter VII (D), FRIA

- Rescission or Nullity of Certain Transactions prior to Liquidation Order or commencement date. Sec. 127, FRIA

Section 127. Rescission or Nullity of Certain Transactions. - Any transaction occurring prior to the issuance of the Liquidation
Order or, in case of the conversion of the rehabilitation proceedings prior to the commencement date, entered into by the
debtor or involving its assets, may be rescinded or declared null and void on the ground that the same was executed with
intent to defraud a creditor or creditors or which constitute undue preference of creditors. The presumptions set forth in
Section 58 hereof shall apply.

viii. Liquidation Plan

- Chapter VII (E), FRIA

- Concurrence and Preference of Credits to be observed. Sec. 133, FRIA

Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and its Implementation shall ensure that the
concurrence and preference of credits as enumerated in the Civil Code of the Philippines and other relevant laws shall be
observed, unless a preferred creditor voluntarily waives his preferred right. For purposes of this chapter, credits for services
rendered by employees or laborers to the debtor shall enjoy first preference under Article 2244 of the Civil Code, unless the
claims constitute legal liens under Article 2241 and 2242 thereof.