CCP Sca

GSV-1
BATAS PAMBANSA BLG. 68

THE CORPORATION CODE OF THE PHILIPPINES
TITLE I - GENERAL PROVISIONS DEFINITIONS AND CLASSIFICATIONS
Section 1. Title of the Code. - This Code shall be known as "The Corporation Code of the Philippines." (n)
Section 2. Corporation defned. - A corporation is an articial bein! created b" operation of law# ha$in!
the ri!ht of s%ccession and the powers# attrib%tes and properties e&pressl" a%thori'ed b" law or incident to
its e&istence. (()
Section . Classes of corporations. - Corporations for)ed or or!ani'ed %nder this Code )a" be stock or
non-stock corporations. Corporations which ha$e capital stock di$ided into shares and are a%thori'ed to
distrib%te to the holders of s%ch shares di$idends or allot)ents of the s%rpl%s prots on the basis of the
shares held are stock corporations. All other corporations are non-stock corporations. (*a)
Section !. Corporations created by special laws or charters. - Corporations created b" special laws or
charters shall be !o$erned pri)aril" b" the pro$isions of the special law or charter creatin! the) or
applicable to the)# s%pple)ented b" the pro$isions of this Code# insofar as the" are applicable. (n)
Section ". Corporators and incorporators, stockholders and members. - Corporators are those who
co)pose a corporation# whether as stockholders or as )e)bers. +ncorporators are those stockholders or
)e)bers )entioned in the articles of incorporation as ori!inall" for)in! and co)posin! the corporation
and who are si!natories thereof.
Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-stock
corporation are called )e)bers. (,a)
Section 6. Classifcation of shares. - The shares of stock of stock corporations )a" be di$ided into classes
or series of shares# or both# an" of which classes or series of shares )a" ha$e s%ch ri!hts# pri$ile!es or
restrictions as )a" be stated in the articles of incorporation- Pro$ided# That no share )a" be depri$ed of
$otin! ri!hts e&cept those classied and iss%ed as "preferred" or "redee)able" shares# %nless otherwise
pro$ided in this Code- Pro$ided# f%rther# That there shall alwa"s be a class or series of shares which ha$e
co)plete $otin! ri!hts. An" or all of the shares or series of shares )a" ha$e a par $al%e or ha$e no par
$al%e as )a" be pro$ided for in the articles of incorporation- Pro$ided# howe$er# That banks# tr%st
co)panies# ins%rance co)panies# p%blic %tilities# and b%ildin! and loan associations shall not be per)itted
to iss%e no-par $al%e shares of stock.
Preferred shares of stock iss%ed b" an" corporation )a" be !i$en preference in the distrib%tion of the
assets of the corporation in case of li.%idation and in the distrib%tion of di$idends# or s%ch other
preferences as )a" be stated in the articles of incorporation which are not $iolati$e of the pro$isions of
this Code- Pro$ided# That preferred shares of stock )a" be iss%ed onl" with a stated par $al%e. The board
of directors# where a%thori'ed in the articles of incorporation# )a" & the ter)s and conditions of preferred
shares of stock or an" series thereof- Pro$ided# That s%ch ter)s and conditions shall be e/ecti$e %pon the
lin! of a certicate thereof with the Sec%rities and 0&chan!e Co))ission.
Shares of capital stock iss%ed witho%t par $al%e shall be dee)ed f%ll" paid and non-assessable and the
holder of s%ch shares shall not be liable to the corporation or to its creditors in respect thereto- Pro$ided1
That shares witho%t par $al%e )a" not be iss%ed for a consideration less than the $al%e of $e (P2.33)
pesos per share- Pro$ided# f%rther# That the entire consideration recei$ed b" the corporation for its no-par
$al%e shares shall be treated as capital and shall not be a$ailable for distrib%tion as di$idends.
A corporation )a"# f%rther)ore# classif" its shares for the p%rpose of ins%rin! co)pliance with
constit%tional or le!al re.%ire)ents.
0&cept as otherwise pro$ided in the articles of incorporation and stated in the certicate of stock# each
share shall be e.%al in all respects to e$er" other share.
4here the articles of incorporation pro$ide for non-$otin! shares in the cases allowed b" this Code# the
holders of s%ch shares shall ne$ertheless be entitled to $ote on the followin! )atters-
1. A)end)ent of the articles of incorporation1
(. Adoption and a)end)ent of b"-laws1
GSV-(
*. Sale# lease# e&chan!e# )ort!a!e# pled!e or other disposition of all or s%bstantiall" all of the
corporate propert"1
,. +nc%rrin!# creatin! or increasin! bonded indebtedness1
2. +ncrease or decrease of capital stock1
5. 6er!er or consolidation of the corporation with another corporation or other corporations1
7. +n$est)ent of corporate f%nds in another corporation or b%siness in accordance with this Code1
and
8. 9issol%tion of the corporation.
0&cept as pro$ided in the i))ediatel" precedin! para!raph# the $ote necessar" to appro$e a partic%lar
corporate act as pro$ided in this Code shall be dee)ed to refer onl" to stocks with $otin! ri!hts. (2a)
Section #. Founders' shares. - :o%nders; shares classied as s%ch in the articles of incorporation )a" be
!i$en certain ri!hts and pri$ile!es not en<o"ed b" the owners of other stocks# pro$ided that where the
e&cl%si$e ri!ht to $ote and be $oted for in the election of directors is !ranted# it )%st be for a li)ited
period not to e&ceed $e (2) "ears s%b<ect to the appro$al of the Sec%rities and 0&chan!e Co))ission.
The $e-"ear period shall co))ence fro) the date of the aforesaid appro$al b" the Sec%rities and
0&chan!e Co))ission. (n)
Section 8. Redeemable shares. - =edee)able shares )a" be iss%ed b" the corporation when e&pressl" so
pro$ided in the articles of incorporation. The" )a" be p%rchased or taken %p b" the corporation %pon the
e&piration of a &ed period# re!ardless of the e&istence of %nrestricted retained earnin!s in the books of
the corporation# and %pon s%ch other ter)s and conditions as )a" be stated in the articles of
incorporation# which ter)s and conditions )%st also be stated in the certicate of stock representin! said
shares. (n)
Section $. Treasury shares. - Treas%r" shares are shares of stock which ha$e been iss%ed and f%ll" paid
for# b%t s%bse.%entl" reac.%ired b" the iss%in! corporation b" p%rchase# rede)ption# donation or thro%!h
so)e other lawf%l )eans. S%ch shares )a" a!ain be disposed of for a reasonable price &ed b" the board
of directors. (n)
TITLE II - INCORPORATION AND ORGANI%ATION OF PRIVATE CORPORATIONS
Section 1&. Number and qualifcations of incorporators. - An" n%)ber of nat%ral persons not less than $e
(2) b%t not )ore than fteen (12)# all of le!al a!e and a )a<orit" of who) are residents of the Philippines#
)a" for) a pri$ate corporation for an" lawf%l p%rpose or p%rposes. 0ach of the incorporators of s stock
corporation )%st own or be a s%bscriber to at least one (1) share of the capital stock of the corporation.
(5a)
Section 11. Corporate term. - A corporation shall e&ist for a period not e&ceedin! ft" (23) "ears fro) the
date of incorporation %nless sooner dissol$ed or %nless said period is e&tended. The corporate ter) as
ori!inall" stated in the articles of incorporation )a" be e&tended for periods not e&ceedin! ft" (23) "ears
in an" sin!le instance b" an a)end)ent of the articles of incorporation# in accordance with this Code1
Pro$ided# That no e&tension can be )ade earlier than $e (2) "ears prior to the ori!inal or s%bse.%ent
e&pir" date(s) %nless there are <%stiable reasons for an earlier e&tension as )a" be deter)ined b" the
Sec%rities and 0&chan!e Co))ission. (5)
Section 12. inimum capital stock required of stock corporations. - Stock corporations incorporated %nder
this Code shall not be re.%ired to ha$e an" )ini)%) a%thori'ed capital stock e&cept as otherwise
specicall" pro$ided for b" special law# and s%b<ect to the pro$isions of the followin! section.
Section 1. !mount of capital stock to be subscribed and paid for the purposes of incorporation. - At least
twent"-$e percent ((2>) of the a%thori'ed capital stock as stated in the articles of incorporation )%st be
s%bscribed at the ti)e of incorporation# and at least twent"-$e ((2>) per cent of the total s%bscription
)%st be paid %pon s%bscription# the balance to be pa"able on a date or dates &ed in the contract of
s%bscription witho%t need of call# or in the absence of a &ed date or dates# %pon call for pa")ent b" the
board of directors- Pro$ided# howe$er# That in no case shall the paid-%p capital be less than $e Tho%sand
(P2#333.33) pesos. (n)
Section 1!. Contents of the articles of incorporation. - All corporations or!ani'ed %nder this code shall le
with the Sec%rities and 0&chan!e Co))ission articles of incorporation in an" of the o?cial lan!%a!es d%l"
si!ned and acknowled!ed b" all of the incorporators# containin! s%bstantiall" the followin! )atters# e&cept
as otherwise prescribed b" this Code or b" special law-
GSV-*
1. The na)e of the corporation1
(. The specic p%rpose or p%rposes for which the corporation is bein! incorporated. 4here a
corporation has )ore than one stated p%rpose# the articles of incorporation shall state which is the
pri)ar" p%rpose and which is@are the secondar" p%rpose or p%rposes- Pro$ided# That a non-stock
corporation )a" not incl%de a p%rpose which wo%ld chan!e or contradict its nat%re as s%ch1
*. The place where the principal o?ce of the corporation is to be located# which )%st be within the
Philippines1
,. The ter) for which the corporation is to e&ist1
2. The na)es# nationalities and residences of the incorporators1
5. The n%)ber of directors or tr%stees# which shall not be less than $e (2) nor )ore than fteen
(12)1
7. The na)es# nationalities and residences of persons who shall act as directors or tr%stees %ntil the
rst re!%lar directors or tr%stees are d%l" elected and .%alied in accordance with this Code1
8. +f it be a stock corporation# the a)o%nt of its a%thori'ed capital stock in lawf%l )one" of the
Philippines# the n%)ber of shares into which it is di$ided# and in case the share are par $al%e
shares# the par $al%e of each# the na)es# nationalities and residences of the ori!inal s%bscribers#
and the a)o%nt s%bscribed and paid b" each on his s%bscription# and if so)e or all of the shares
are witho%t par $al%e# s%ch fact )%st be stated1
A. +f it be a non-stock corporation# the a)o%nt of its capital# the na)es# nationalities and residences
of the contrib%tors and the a)o%nt contrib%ted b" each1 and
13. S%ch other )atters as are not inconsistent with law and which the incorporators )a" dee)
necessar" and con$enient.
The Sec%rities and 0&chan!e Co))ission shall not accept the articles of incorporation of an" stock
corporation %nless acco)panied b" a sworn state)ent of the Treas%rer elected b" the s%bscribers showin!
that at least twent"-$e ((2>) percent of the a%thori'ed capital stock of the corporation has been
s%bscribed# and at least twent"-$e ((2>) of the total s%bscription has been f%ll" paid to hi) in act%al
cash and@or in propert" the fair $al%ation of which is e.%al to at least twent"-$e ((2>) percent of the said
s%bscription# s%ch paid-%p capital bein! not less than $e tho%sand (P2#333.33) pesos.
Section 1". Forms of !rticles of "ncorporation. - Bnless otherwise prescribed b" special law# articles of
incorporation of all do)estic corporations shall co)pl" s%bstantiall" with the followin! for)-
A=T+CC0S D: +ECD=PD=AT+DE D:
FFFFFFFFFFFFFFFFFFFFFFFFFF
(Ea)e of Corporation)
GED4 ACC 60E HI TJ0S0 P=0S0ETS-
The %ndersi!ned incorporators# all of le!al a!e and a )a<orit" of who) are residents of the Philippines#
ha$e this da" $ol%ntaril" a!reed to for) a (stock) (non-stock) corporation %nder the laws of the =ep%blic of
the Philippines1
AE9 40 J0=0HI C0=T+:I-
:+=ST- That the na)e of said corporation shall be "FFFFFFFFFFFFFFFFFFFFF# +EC. or CD=PD=AT+DE"1
S0CDE9- That the p%rpose or p%rposes for which s%ch corporation is incorporated are- (+f there is )ore
than one p%rpose# indicate pri)ar" and secondar" p%rposes)1
TJ+=9- That the principal o?ce of the corporation is located in the Cit"@6%nicipalit" of
FFFFFFFFFFFFFFFFFFFFFFFF# Pro$ince of FFFFFFFFFFFFFFFFFFFFFFF# Philippines1
:DB=TJ- That the ter) for which said corporation is to e&ist is FFFFFFFFFFFFF "ears fro) and after the date
of iss%ance of the certicate of incorporation1
GSV-,
:+:TJ- That the na)es# nationalities and residences of the incorporators of the corporation are as follows-
EA60 EAT+DEAC+TI =0S+90EC0
FFFFFFFFFFFFFFFFFFF FFFFFFFFFFFFFFFFFFF FFFFFFFFFFFFFFFFFFF
S+KTJ- That the n%)ber of directors or tr%stees of the corporation shall be FFFFFFF1 and the na)es#
nationalities and residences of the rst directors or tr%stees of the corporation are as follows-
EA60 EAT+DEAC+TI =0S+90EC0
S0V0ETJ- That the a%thori'ed capital stock of the corporation is FFFFFFFFFFFFFFFFFFFFFF (PFFFFFFFFFFF)
P0SDS in lawf%l )one" of the Philippines# di$ided into FFFFFFFFFF shares with the par $al%e of
FFFFFFFFFFFFFFFFFFFF (PFFFFFFFFFFFFF) Pesos per share.
(+n case all the share are witho%t par $al%e)-
That the capital stock of the corporation is FFFFFFFFFFFFFF shares witho%t par $al%e. (+n case so)e shares
ha$e par $al%e and so)e are witho%t par $al%e)- That the capital stock of said corporation consists of
FFFFFFFFFFFFF shares of which FFFFFFFFFFFFFF shares are of the par $al%e of FFFFFFFFFFFFFFFFF (PFFFFFFFFFFFF)
P0SDS each# and of which FFFFFFFFFFFFFFFFF shares are witho%t par $al%e.
0+GJTJ- That at least twent" $e ((2>) per cent of the a%thori'ed capital stock abo$e stated has been
s%bscribed as follows-
Ea)e of S%bscriber Eationalit" Eo of Shares A)o%nt
S%bscribed S%bscribed
FFFFFFFFFFFFFFFFF FFFFFFFFFF FFFFFFFFFFFF FFFFFFFFFFFF
E+ETJ- That the abo$e-na)ed s%bscribers ha$e paid at least twent"-$e ((2>) percent of the total
s%bscription as follows-
Ea)e of S%bscriber A)o%nt S%bscribed Total Paid-+n
FFFFFFFFFFFFFFFFF FFFFFFFFFFFFFFFFFFF FFFFFFFFFFFFFFF
GSV-2
(6odif" Eos. 8 and A if shares are with no par $al%e. +n case the corporation is non-stock# Eos. 7# 8 and A of
the abo$e articles )a" be )odied accordin!l"# and it is s%?cient if the articles state the a)o%nt of
capital or )one" contrib%ted or donated b" specied persons# statin! the na)es# nationalities and
residences of the contrib%tors or donors and the respecti$e a)o%nt !i$en b" each.)
T0ETJ- That FFFFFFFFFFFFFFFFFFFFF has been elected b" the s%bscribers as Treas%rer of the Corporation to
act as s%ch %ntil his s%ccessor is d%l" elected and .%alied in accordance with the b"-laws# and that as
s%ch Treas%rer# he has been a%thori'ed to recei$e for and in the na)e and for the benet of the
corporation# all s%bscription (or fees) or contrib%tions or donations paid or !i$en b" the s%bscribers or
)e)bers.
0C0V0ETJ- (Corporations which will en!a!e in an" b%siness or acti$it" reser$ed for :ilipino citi'ens shall
pro$ide the followin!)-
"Eo transfer of stock or interest which shall red%ce the ownership of :ilipino citi'ens to less than the
re.%ired percenta!e of the capital stock as pro$ided b" e&istin! laws shall be allowed or per)itted to be
recorded in the proper books of the corporation and this restriction shall be indicated in all stock
certicates iss%ed b" the corporation."
+E 4+TE0SS 4J0=0D:# we ha$e here%nto si!ned these Articles of +ncorporation# this FFFFFFFFFF da" of
FFFFFFFFFFFFFFFF# 1A FFFFFF in the Cit"@6%nicipalit" of FFFFFFFFFFFFFFFFFFFF# Pro$ince of
FFFFFFFFFFFFFFFFFFFFFFFF# =ep%blic of the Philippines.
FFFFFFFFFFFFFFFFFFFFFFF FFFFFFFFFFFFFFFFFFFFFFF
FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF
(Ea)es and si!nat%res of the incorporators)
S+GE09 +E TJ0 P=0S0EC0 D:-
(Eotarial Acknowled!)ent)
T=0ASB=0=;S A::+9AV+T
=0PBHC+C D: TJ0 PJ+C+PP+E0S )
C+TI@6BE+C+PAC+TI D: ) S.S.
P=DV+EC0 D: )
+# FFFFFFFFFFFFFFFFFFFF# bein! d%l" sworn# depose and sa"-
That + ha$e been elected b" the s%bscribers of the corporation as Treas%rer thereof# to act as s%ch %ntil )"
s%ccessor has been d%l" elected and .%alied in accordance with the b"-laws of the corporation# and that
as s%ch Treas%rer# + hereb" certif" %nder oath that at least (2> of the a%thori'ed capital stock of the
corporation has been s%bscribed and at least (2> of the total s%bscription has been paid# and recei$ed b"
)e# in cash or propert"# in the a)o%nt of not less than P2#333.33# in accordance with the Corporation
Code.
FFFFFFFFFFFFFFFFFFFF
(Si!nat%re of Treas%rer)
SBHSC=+H09 AE9 S4D=E to before )e# a Eotar" P%blic# for and in the Cit"@6%nicipalit" of
FFFFFFFFFFFFFFFFFFF Pro$ince of FFFFFFFFFFFFFFFFFFFFF# this FFFFFFF da" of FFFFFFFFFFF# 1A FFFFF1 b"
GSV-5
FFFFFFFFFFFFFFFFFF with =es. Cert. Eo. FFFFFFFFFFF iss%ed at FFFFFFFFFFFFFFFFFFFFFFF on FFFFFFFFFFFF# 1A
FFFFFF
EDTA=I PBHC+C
6" co))ission e&pires on
FFFFFFFFF# 1A FFFFF
9oc. Eo. FFFFFFFFF1
Pa!e Eo. FFFFFFFFF1
Hook Eo. FFFFFFFF1
Series of 1AFFFF (7a)
Section 16. !mendment of !rticles of "ncorporation. - Bnless otherwise prescribed b" this Code or b"
special law# and for le!iti)ate p%rposes# an" pro$ision or )atter stated in the articles of incorporation )a"
be a)ended b" a )a<orit" $ote of the board of directors or tr%stees and the $ote or written assent of the
stockholders representin! at least two-thirds ((@*) of the o%tstandin! capital stock# witho%t pre<%dice to the
appraisal ri!ht of dissentin! stockholders in accordance with the pro$isions of this Code# or the $ote or
written assent of at least two-thirds ((@*) of the )e)bers if it be a non-stock corporation.
The ori!inal and a)ended articles to!ether shall contain all pro$isions re.%ired b" law to be set o%t in the
articles of incorporation. S%ch articles# as a)ended shall be indicated b" %nderscorin! the chan!e or
chan!es )ade# and a cop" thereof d%l" certied %nder oath b" the corporate secretar" and a )a<orit" of
the directors or tr%stees statin! the fact that said a)end)ent or a)end)ents ha$e been d%l" appro$ed
b" the re.%ired $ote of the stockholders or )e)bers# shall be s%b)itted to the Sec%rities and 0&chan!e
Co))ission.
The a)end)ents shall take e/ect %pon their appro$al b" the Sec%rities and 0&chan!e Co))ission or fro)
the date of lin! with the said Co))ission if not acted %pon within si& (5) )onths fro) the date of lin!
for a ca%se not attrib%table to the corporation.
Section 1#. #rounds when articles of incorporation or amendment may be re$ected or disappro%ed. - The
Sec%rities and 0&chan!e Co))ission )a" re<ect the articles of incorporation or disappro$e an"
a)end)ent thereto if the sa)e is not in co)pliance with the re.%ire)ents of this Code- Pro$ided# That the
Co))ission shall !i$e the incorporators a reasonable ti)e within which to correct or )odif" the
ob<ectionable portions of the articles or a)end)ent. The followin! are !ro%nds for s%ch re<ection or
disappro$al-
1. That the articles of incorporation or an" a)end)ent thereto is not s%bstantiall" in
accordance with the for) prescribed herein1
(. That the p%rpose or p%rposes of the corporation are patentl" %nconstit%tional# ille!al#
i))oral# or contrar" to !o$ern)ent r%les and re!%lations1
*. That the Treas%rer;s A?da$it concernin! the a)o%nt of capital stock s%bscribed and@or
paid is false1
,. That the percenta!e of ownership of the capital stock to be owned b" citi'ens of the
Philippines has not been co)plied with as re.%ired b" e&istin! laws or the Constit%tion.
Eo articles of incorporation or a)end)ent to articles of incorporation of banks# bankin! and .%asi-bankin!
instit%tions# b%ildin! and loan associations# tr%st co)panies and other nancial inter)ediaries# ins%rance
co)panies# p%blic %tilities# ed%cational instit%tions# and other corporations !o$erned b" special laws shall
be accepted or appro$ed b" the Co))ission %nless acco)panied b" a fa$orable reco))endation of the
appropriate !o$ern)ent a!enc" to the e/ect that s%ch articles or a)end)ent is in accordance with law.
(n)
Section 18. Corporate name. - Eo corporate na)e )a" be allowed b" the Sec%rities and 0&chan!e
Co))ission if the proposed na)e is identical or decepti$el" or conf%sin!l" si)ilar to that of an" e&istin!
corporation or to an" other na)e alread" protected b" law or is patentl" decepti$e# conf%sin! or contrar"
to e&istin! laws. 4hen a chan!e in the corporate na)e is appro$ed# the Co))ission shall iss%e an
a)ended certicate of incorporation %nder the a)ended na)e. (n)
GSV-7
Section 1$. Commencement of corporate e&istence. - A pri$ate corporation for)ed or or!ani'ed %nder
this Code co))ences to ha$e corporate e&istence and <%ridical personalit" and is dee)ed incorporated
fro) the date the Sec%rities and 0&chan!e Co))ission iss%es a certicate of incorporation %nder its
o?cial seal1 and there%pon the incorporators# stockholders@)e)bers and their s%ccessors shall constit%te
a bod" politic and corporate %nder the na)e stated in the articles of incorporation for the period of ti)e
)entioned therein# %nless said period is e&tended or the corporation is sooner dissol$ed in accordance
with law. (n)
Section 2&. 'e facto corporations. - The d%e incorporation of an" corporation clai)in! in !ood faith to be
a corporation %nder this Code# and its ri!ht to e&ercise corporate powers# shall not be in.%ired into
collaterall" in an" pri$ate s%it to which s%ch corporation )a" be a part". S%ch in.%ir" )a" be )ade b" the
Solicitor General in a .%o warranto proceedin!. (n)
Section 21. Corporation by estoppel. - All persons who ass%)e to act as a corporation knowin! it to be
witho%t a%thorit" to do so shall be liable as !eneral partners for all debts# liabilities and da)a!es inc%rred
or arisin! as a res%lt thereof- Pro$ided# howe$er# That when an" s%ch ostensible corporation is s%ed on an"
transaction entered b" it as a corporation or on an" tort co))itted b" it as s%ch# it shall not be allowed to
%se as a defense its lack of corporate personalit".
Dn who ass%)es an obli!ation to an ostensible corporation as s%ch# cannot resist perfor)ance thereof on
the !ro%nd that there was in fact no corporation. (n)
Section 22. ()ects on non*use of corporate charter and continuous inoperation of a corporation. - +f a
corporation does not for)all" or!ani'e and co))ence the transaction of its b%siness or the constr%ction of
its works within two (() "ears fro) the date of its incorporation# its corporate powers cease and the
corporation shall be dee)ed dissol$ed. Jowe$er# if a corporation has co))enced the transaction of its
b%siness b%t s%bse.%entl" beco)es contin%o%sl" inoperati$e for a period of at least $e (2) "ears# the
sa)e shall be a !ro%nd for the s%spension or re$ocation of its corporate franchise or certicate of
incorporation. (1Aa)
This pro$ision shall not appl" if the fail%re to or!ani'e# co))ence the transaction of its b%sinesses or the
constr%ction of its works# or to contin%o%sl" operate is d%e to ca%ses be"ond the control of the corporation
as )a" be deter)ined b" the Sec%rities and 0&chan!e Co))ission.
TITLE III - BOARD OF DIRECTORS'TR(STEES AND OFFICERS
Section 2. The board of directors or trustees. - Bnless otherwise pro$ided in this Code# the corporate
powers of all corporations for)ed %nder this Code shall be e&ercised# all b%siness cond%cted and all
propert" of s%ch corporations controlled and held b" the board of directors or tr%stees to be elected fro)
a)on! the holders of stocks# or where there is no stock# fro) a)on! the )e)bers of the corporation# who
shall hold o?ce for one (1) "ear %ntil their s%ccessors are elected and .%alied. ((8a)
0$er" director )%st own at least one (1) share of the capital stock of the corporation of which he is a
director# which share shall stand in his na)e on the books of the corporation. An" director who ceases to
be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall
thereb" cease to be a director. Tr%stees of non-stock corporations )%st be )e)bers thereof. A )a<orit" of
the directors or tr%stees of all corporations or!ani'ed %nder this Code )%st be residents of the Philippines.
Section 2!. (lection of directors or trustees. - At all elections of directors or tr%stees# there )%st be
present# either in person or b" representati$e a%thori'ed to act b" written pro&"# the owners of a )a<orit"
of the o%tstandin! capital stock# or if there be no capital stock# a )a<orit" of the )e)bers entitled to $ote.
The election )%st be b" ballot if re.%ested b" an" $otin! stockholder or )e)ber. +n stock corporations#
e$er" stockholder entitled to $ote shall ha$e the ri!ht to $ote in person or b" pro&" the n%)ber of shares
of stock standin!# at the ti)e &ed in the b"-laws# in his own na)e on the stock books of the corporation#
or where the b"-laws are silent# at the ti)e of the election1 and said stockholder )a" $ote s%ch n%)ber of
shares for as )an" persons as there are directors to be elected or he )a" c%)%late said shares and !i$e
one candidate as )an" $otes as the n%)ber of directors to be elected )%ltiplied b" the n%)ber of his
shares shall e.%al# or he )a" distrib%te the) on the sa)e principle a)on! as )an" candidates as he shall
see t- Pro$ided# That the total n%)ber of $otes cast b" hi) shall not e&ceed the n%)ber of shares owned
b" hi) as shown in the books of the corporation )%ltiplied b" the whole n%)ber of directors to be elected-
Pro$ided# howe$er# That no delin.%ent stock shall be $oted. Bnless otherwise pro$ided in the articles of
incorporation or in the b"-laws# )e)bers of corporations which ha$e no capital stock )a" cast as )an"
$otes as there are tr%stees to be elected b%t )a" not cast )ore than one $ote for one candidate.
Candidates recei$in! the hi!hest n%)ber of $otes shall be declared elected. An" )eetin! of the
stockholders or )e)bers called for an election )a" ad<o%rn fro) da" to da" or fro) ti)e to ti)e b%t not
sine die or indenitel" if# for an" reason# no election is held# or if there are not present or represented b"
pro&"# at the )eetin!# the owners of a )a<orit" of the o%tstandin! capital stock# or if there be no capital
stock# a )a<orit" of the )e)ber entitled to $ote. (*1a)
GSV-8
Section 2". Corporate o+cers, quorum. - +))ediatel" after their election# the directors of a corporation
)%st for)all" or!ani'e b" the election of a president# who shall be a director# a treas%rer who )a" or )a"
not be a director# a secretar" who shall be a resident and citi'en of the Philippines# and s%ch other o?cers
as )a" be pro$ided for in the b"-laws. An" two (() or )ore positions )a" be held conc%rrentl" b" the
sa)e person# e&cept that no one shall act as president and secretar" or as president and treas%rer at the
sa)e ti)e.
The directors or tr%stees and o?cers to be elected shall perfor) the d%ties en<oined on the) b" law and
the b"-laws of the corporation. Bnless the articles of incorporation or the b"-laws pro$ide for a !reater
)a<orit"# a )a<orit" of the n%)ber of directors or tr%stees as &ed in the articles of incorporation shall
constit%te a .%or%) for the transaction of corporate b%siness# and e$er" decision of at least a )a<orit" of
the directors or tr%stees present at a )eetin! at which there is a .%or%) shall be $alid as a corporate act#
e&cept for the election of o?cers which shall re.%ire the $ote of a )a<orit" of all the )e)bers of the
board.
9irectors or tr%stees cannot attend or $ote b" pro&" at board )eetin!s. (**a)
Section 26. Report of election of directors, trustees and o+cers. - 4ithin thirt" (*3) da"s after the
election of the directors# tr%stees and o?cers of the corporation# the secretar"# or an" other o?cer of the
corporation# shall s%b)it to the Sec%rities and 0&chan!e Co))ission# the na)es# nationalities and
residences of the directors# tr%stees# and o?cers elected. Sho%ld a director# tr%stee or o?cer die# resi!n or
in an" )anner cease to hold o?ce# his heirs in case of his death# the secretar"# or an" other o?cer of the
corporation# or the director# tr%stee or o?cer hi)self# shall i))ediatel" report s%ch fact to the Sec%rities
and 0&chan!e Co))ission. (n)
Section 2#. 'isqualifcation of directors, trustees or o+cers. - Eo person con$icted b" nal <%d!)ent of
an o/ense p%nishable b" i)prison)ent for a period e&ceedin! si& (5) "ears# or a $iolation of this Code
co))itted within $e (2) "ears prior to the date of his election or appoint)ent# shall .%alif" as a director#
tr%stee or o?cer of an" corporation. (n)
Section 28. Remo%al of directors or trustees. - An" director or tr%stee of a corporation )a" be re)o$ed
fro) o?ce b" a $ote of the stockholders holdin! or representin! at least two-thirds ((@*) of the
o%tstandin! capital stock# or if the corporation be a non-stock corporation# b" a $ote of at least two-thirds
((@*) of the )e)bers entitled to $ote- Pro$ided# That s%ch re)o$al shall take place either at a re!%lar
)eetin! of the corporation or at a special )eetin! called for the p%rpose# and in either case# after pre$io%s
notice to stockholders or )e)bers of the corporation of the intention to propose s%ch re)o$al at the
)eetin!. A special )eetin! of the stockholders or )e)bers of a corporation for the p%rpose of re)o$al of
directors or tr%stees# or an" of the)# )%st be called b" the secretar" on order of the president or on the
written de)and of the stockholders representin! or holdin! at least a )a<orit" of the o%tstandin! capital
stock# or# if it be a non-stock corporation# on the written de)and of a )a<orit" of the )e)bers entitled to
$ote. Sho%ld the secretar" fail or ref%se to call the special )eetin! %pon s%ch de)and or fail or ref%se to
!i$e the notice# or if there is no secretar"# the call for the )eetin! )a" be addressed directl" to the
stockholders or )e)bers b" an" stockholder or )e)ber of the corporation si!nin! the de)and. Eotice of
the ti)e and place of s%ch )eetin!# as well as of the intention to propose s%ch re)o$al# )%st be !i$en b"
p%blication or b" written notice prescribed in this Code. =e)o$al )a" be with or witho%t ca%se- Pro$ided#
That re)o$al witho%t ca%se )a" not be %sed to depri$e )inorit" stockholders or )e)bers of the ri!ht of
representation to which the" )a" be entitled %nder Section (, of this Code. (n)
Section 2$. ,acancies in the o+ce of director or trustee. - An" $acanc" occ%rrin! in the board of directors
or tr%stees other than b" re)o$al b" the stockholders or )e)bers or b" e&piration of ter)# )a" be lled
b" the $ote of at least a )a<orit" of the re)ainin! directors or tr%stees# if still constit%tin! a .%or%)1
otherwise# said $acancies )%st be lled b" the stockholders in a re!%lar or special )eetin! called for that
p%rpose. A director or tr%stee so elected to ll a $acanc" shall be elected onl" or the %ne&pired ter) of his
predecessor in o?ce.
An" directorship or tr%steeship to be lled b" reason of an increase in the n%)ber of directors or tr%stees
shall be lled onl" b" an election at a re!%lar or at a special )eetin! of stockholders or )e)bers d%l"
called for the p%rpose# or in the sa)e )eetin! a%thori'in! the increase of directors or tr%stees if so stated
in the notice of the )eetin!. (n)
Section &. Compensation of directors. - +n the absence of an" pro$ision in the b"-laws &in! their
co)pensation# the directors shall not recei$e an" co)pensation# as s%ch directors# e&cept for reasonable
per die)s- Pro$ided# howe$er# That an" s%ch co)pensation other than per die)s )a" be !ranted to
directors b" the $ote of the stockholders representin! at least a )a<orit" of the o%tstandin! capital stock at
a re!%lar or special stockholders; )eetin!. +n no case shall the total "earl" co)pensation of directors# as
s%ch directors# e&ceed ten (13>) percent of the net inco)e before inco)e ta& of the corporation d%rin!
the precedin! "ear. (n)
GSV-A
Section 1. -iability of directors, trustees or o+cers. - 9irectors or tr%stees who wilf%ll" and knowin!l"
$ote for or assent to patentl" %nlawf%l acts of the corporation or who are !%ilt" of !ross ne!li!ence or bad
faith in directin! the a/airs of the corporation or ac.%ire an" personal or pec%niar" interest in conLict with
their d%t" as s%ch directors or tr%stees shall be liable <ointl" and se$erall" for all da)a!es res%ltin!
therefro) s%/ered b" the corporation# its stockholders or )e)bers and other persons.
4hen a director# tr%stee or o?cer atte)pts to ac.%ire or ac.%ires# in $iolation of his d%t"# an" interest
ad$erse to the corporation in respect of an" )atter which has been reposed in hi) in condence# as to
which e.%it" i)poses a disabilit" %pon hi) to deal in his own behalf# he shall be liable as a tr%stee for the
corporation and )%st acco%nt for the prots which otherwise wo%ld ha$e accr%ed to the corporation. (n)
Section 2. 'ealin.s of directors, trustees or o+cers with the corporation. - A contract of the corporation
with one or )ore of its directors or tr%stees or o?cers is $oidable# at the option of s%ch corporation# %nless
all the followin! conditions are present-
1. That the presence of s%ch director or tr%stee in the board )eetin! in which the contract was
appro$ed was not necessar" to constit%te a .%or%) for s%ch )eetin!1
(. That the $ote of s%ch director or tr%stee was not necessar" for the appro$al of the contract1
*. That the contract is fair and reasonable %nder the circ%)stances1 and
,. That in case of an o?cer# the contract has been pre$io%sl" a%thori'ed b" the board of directors.
4here an" of the rst two conditions set forth in the precedin! para!raph is absent# in the case of a
contract with a director or tr%stee# s%ch contract )a" be ratied b" the $ote of the stockholders
representin! at least two-thirds ((@*) of the o%tstandin! capital stock or of at least two-thirds ((@*) of the
)e)bers in a )eetin! called for the p%rpose- Pro$ided# That f%ll disclos%re of the ad$erse interest of the
directors or tr%stees in$ol$ed is )ade at s%ch )eetin!- Pro$ided# howe$er# That the contract is fair and
reasonable %nder the circ%)stances. (n)
Section . Contracts between corporations with interlockin. directors. - 0&cept in cases of fra%d# and
pro$ided the contract is fair and reasonable %nder the circ%)stances# a contract between two or )ore
corporations ha$in! interlockin! directors shall not be in$alidated on that !ro%nd alone- Pro$ided# That if
the interest of the interlockin! director in one corporation is s%bstantial and his interest in the other
corporation or corporations is )erel" no)inal# he shall be s%b<ect to the pro$isions of the precedin!
section insofar as the latter corporation or corporations are concerned.
Stockholdin!s e&ceedin! twent" ((3>) percent of the o%tstandin! capital stock shall be considered
s%bstantial for p%rposes of interlockin! directors. (n)
Section !. 'isloyalty of a director. - 4here a director# b" $irt%e of his o?ce# ac.%ires for hi)self a
b%siness opport%nit" which sho%ld belon! to the corporation# thereb" obtainin! prots to the pre<%dice of
s%ch corporation# he )%st acco%nt to the latter for all s%ch prots b" ref%ndin! the sa)e# %nless his act
has been ratied b" a $ote of the stockholders ownin! or representin! at least two-thirds ((@*) of the
o%tstandin! capital stock. This pro$ision shall be applicable# notwithstandin! the fact that the director
risked his own f%nds in the $ent%re. (n)
Section ". (&ecuti%e committee. - The b"-laws of a corporation )a" create an e&ec%ti$e co))ittee#
co)posed of not less than three )e)bers of the board# to be appointed b" the board. Said co))ittee )a"
act# b" )a<orit" $ote of all its )e)bers# on s%ch specic )atters within the co)petence of the board# as
)a" be dele!ated to it in the b"-laws or on a )a<orit" $ote of the board# e&cept with respect to- (1)
appro$al of an" action for which shareholders; appro$al is also re.%ired1 (() the lin! of $acancies in the
board1 (*) the a)end)ent or repeal of b"-laws or the adoption of new b"-laws1 (,) the a)end)ent or
repeal of an" resol%tion of the board which b" its e&press ter)s is not so a)endable or repealable1 and (2)
a distrib%tion of cash di$idends to the shareholders.
TITLE IV - PO)ERS OF CORPORATIONS
Section 6. Corporate powers and capacity. - 0$er" corporation incorporated %nder this Code has the
power and capacit"-
1. To s%e and be s%ed in its corporate na)e1
(. Df s%ccession b" its corporate na)e for the period of ti)e stated in the articles of incorporation
and the certicate of incorporation1
GSV-13
*. To adopt and %se a corporate seal1
,. To a)end its articles of incorporation in accordance with the pro$isions of this Code1
2. To adopt b"-laws# not contrar" to law# )orals# or p%blic polic"# and to a)end or repeal the sa)e
in accordance with this Code1
5. +n case of stock corporations# to iss%e or sell stocks to s%bscribers and to sell stocks to
s%bscribers and to sell treas%r" stocks in accordance with the pro$isions of this Code1 and to ad)it
)e)bers to the corporation if it be a non-stock corporation1
7. To p%rchase# recei$e# take or !rant# hold# con$e"# sell# lease# pled!e# )ort!a!e and otherwise
deal with s%ch real and personal propert"# incl%din! sec%rities and bonds of other corporations# as
the transaction of the lawf%l b%siness of the corporation )a" reasonabl" and necessaril" re.%ire#
s%b<ect to the li)itations prescribed b" law and the Constit%tion1
8. To enter into )er!er or consolidation with other corporations as pro$ided in this Code1
A. To )ake reasonable donations# incl%din! those for the p%blic welfare or for hospital# charitable#
c%lt%ral# scientic# ci$ic# or si)ilar p%rposes- Pro$ided# That no corporation# do)estic or forei!n#
shall !i$e donations in aid of an" political part" or candidate or for p%rposes of partisan political
acti$it"1
13. To establish pension# retire)ent# and other plans for the benet of its directors# tr%stees#
o?cers and e)plo"ees1 and
11. To e&ercise s%ch other powers as )a" be essential or necessar" to carr" o%t its p%rpose or
p%rposes as stated in the articles of incorporation. (1*a)
Section #. /ower to e&tend or shorten corporate term. - A pri$ate corporation )a" e&tend or shorten its
ter) as stated in the articles of incorporation when appro$ed b" a )a<orit" $ote of the board of directors
or tr%stees and ratied at a )eetin! b" the stockholders representin! at least two-thirds ((@*) of the
o%tstandin! capital stock or b" at least two-thirds ((@*) of the )e)bers in case of non-stock corporations.
4ritten notice of the proposed action and of the ti)e and place of the )eetin! shall be addressed to each
stockholder or )e)ber at his place of residence as shown on the books of the corporation and deposited
to the addressee in the post o?ce with posta!e prepaid# or ser$ed personall"- Pro$ided# That in case of
e&tension of corporate ter)# an" dissentin! stockholder )a" e&ercise his appraisal ri!ht %nder the
conditions pro$ided in this code. (n)
Section 8. /ower to increase or decrease capital stock0 incur, create or increase bonded indebtedness. -
Eo corporation shall increase or decrease its capital stock or inc%r# create or increase an" bonded
indebtedness %nless appro$ed b" a )a<orit" $ote of the board of directors and# at a stockholder;s )eetin!
d%l" called for the p%rpose# two-thirds ((@*) of the o%tstandin! capital stock shall fa$or the increase or
di)in%tion of the capital stock# or the inc%rrin!# creatin! or increasin! of an" bonded indebtedness.
4ritten notice of the proposed increase or di)in%tion of the capital stock or of the inc%rrin!# creatin!# or
increasin! of an" bonded indebtedness and of the ti)e and place of the stockholder;s )eetin! at which
the proposed increase or di)in%tion of the capital stock or the inc%rrin! or increasin! of an" bonded
indebtedness is to be considered# )%st be addressed to each stockholder at his place of residence as
shown on the books of the corporation and deposited to the addressee in the post o?ce with posta!e
prepaid# or ser$ed personall".
A certicate in d%plicate )%st be si!ned b" a )a<orit" of the directors of the corporation and
co%ntersi!ned b" the chair)an and the secretar" of the stockholders; )eetin!# settin! forth-
(1) That the re.%ire)ents of this section ha$e been co)plied with1
(() The a)o%nt of the increase or di)in%tion of the capital stock1
(*) +f an increase of the capital stock# the a)o%nt of capital stock or n%)ber of shares of no-par
stock thereof act%all" s%bscribed# the na)es# nationalities and residences of the persons
s%bscribin!# the a)o%nt of capital stock or n%)ber of no-par stock s%bscribed b" each# and the
a)o%nt paid b" each on his s%bscription in cash or propert"# or the a)o%nt of capital stock or
n%)ber of shares of no-par stock allotted to each stock-holder if s%ch increase is for the p%rpose of
)akin! e/ecti$e stock di$idend therefor a%thori'ed1
(,) An" bonded indebtedness to be inc%rred# created or increased1
GSV-11
(2) The act%al indebtedness of the corporation on the da" of the )eetin!1
(5) The a)o%nt of stock represented at the )eetin!1 and
(7) The $ote a%thori'in! the increase or di)in%tion of the capital stock# or the inc%rrin!# creatin! or
increasin! of an" bonded indebtedness.
An" increase or decrease in the capital stock or the inc%rrin!# creatin! or increasin! of an" bonded
indebtedness shall re.%ire prior appro$al of the Sec%rities and 0&chan!e Co))ission.
Dne of the d%plicate certicates shall be kept on le in the o?ce of the corporation and the other shall be
led with the Sec%rities and 0&chan!e Co))ission and attached to the ori!inal articles of incorporation.
:ro) and after appro$al b" the Sec%rities and 0&chan!e Co))ission and the iss%ance b" the Co))ission
of its certicate of lin!# the capital stock shall stand increased or decreased and the inc%rrin!# creatin! or
increasin! of an" bonded indebtedness a%thori'ed# as the certicate of lin! )a" declare- Pro$ided# That
the Sec%rities and 0&chan!e Co))ission shall not accept for lin! an" certicate of increase of capital
stock %nless acco)panied b" the sworn state)ent of the treas%rer of the corporation lawf%ll" holdin!
o?ce at the ti)e of the lin! of the certicate# showin! that at least twent"-$e ((2>) percent of s%ch
increased capital stock has been s%bscribed and that at least twent"-$e ((2>) percent of the a)o%nt
s%bscribed has been paid either in act%al cash to the corporation or that there has been transferred to the
corporation propert" the $al%ation of which is e.%al to twent"-$e ((2>) percent of the s%bscription-
Pro$ided# f%rther# That no decrease of the capital stock shall be appro$ed b" the Co))ission if its e/ect
shall pre<%dice the ri!hts of corporate creditors.
Eon-stock corporations )a" inc%r or create bonded indebtedness# or increase the sa)e# with the appro$al
b" a )a<orit" $ote of the board of tr%stees and of at least two-thirds ((@*) of the )e)bers in a )eetin!
d%l" called for the p%rpose.
Honds iss%ed b" a corporation shall be re!istered with the Sec%rities and 0&chan!e Co))ission# which
shall ha$e the a%thorit" to deter)ine the s%?cienc" of the ter)s thereof. (17a)
Section $. /ower to deny pre*empti%e ri.ht. - All stockholders of a stock corporation shall en<o" pre-
e)pti$e ri!ht to s%bscribe to all iss%es or disposition of shares of an" class# in proportion to their
respecti$e shareholdin!s# %nless s%ch ri!ht is denied b" the articles of incorporation or an a)end)ent
thereto- Pro$ided# That s%ch pre-e)pti$e ri!ht shall not e&tend to shares to be iss%ed in co)pliance with
laws re.%irin! stock o/erin!s or )ini)%) stock ownership b" the p%blic1 or to shares to be iss%ed in !ood
faith with the appro$al of the stockholders representin! two-thirds ((@*) of the o%tstandin! capital stock# in
e&chan!e for propert" needed for corporate p%rposes or in pa")ent of a pre$io%sl" contracted debt.
Section !&. 1ale or other disposition of assets. - S%b<ect to the pro$isions of e&istin! laws on ille!al
co)binations and )onopolies# a corporation )a"# b" a )a<orit" $ote of its board of directors or tr%stees#
sell# lease# e&chan!e# )ort!a!e# pled!e or otherwise dispose of all or s%bstantiall" all of its propert" and
assets# incl%din! its !oodwill# %pon s%ch ter)s and conditions and for s%ch consideration# which )a" be
)one"# stocks# bonds or other instr%)ents for the pa")ent of )one" or other propert" or consideration#
as its board of directors or tr%stees )a" dee) e&pedient# when a%thori'ed b" the $ote of the stockholders
representin! at least two-thirds ((@*) of the o%tstandin! capital stock# or in case of non-stock corporation#
b" the $ote of at least to two-thirds ((@*) of the )e)bers# in a stockholder;s or )e)ber;s )eetin! d%l"
called for the p%rpose. 4ritten notice of the proposed action and of the ti)e and place of the )eetin! shall
be addressed to each stockholder or )e)ber at his place of residence as shown on the books of the
corporation and deposited to the addressee in the post o?ce with posta!e prepaid# or ser$ed personall"-
Pro$ided# That an" dissentin! stockholder )a" e&ercise his appraisal ri!ht %nder the conditions pro$ided in
this Code.
A sale or other disposition shall be dee)ed to co$er s%bstantiall" all the corporate propert" and assets if
thereb" the corporation wo%ld be rendered incapable of contin%in! the b%siness or acco)plishin! the
p%rpose for which it was incorporated.
After s%ch a%thori'ation or appro$al b" the stockholders or )e)bers# the board of directors or tr%stees
)a"# ne$ertheless# in its discretion# abandon s%ch sale# lease# e&chan!e# )ort!a!e# pled!e or other
disposition of propert" and assets# s%b<ect to the ri!hts of third parties %nder an" contract relatin! thereto#
witho%t f%rther action or appro$al b" the stockholders or )e)bers.
Eothin! in this section is intended to restrict the power of an" corporation# witho%t the a%thori'ation b" the
stockholders or )e)bers# to sell# lease# e&chan!e# )ort!a!e# pled!e or otherwise dispose of an" of its
propert" and assets if the sa)e is necessar" in the %s%al and re!%lar co%rse of b%siness of said
corporation or if the proceeds of the sale or other disposition of s%ch propert" and assets be appropriated
for the cond%ct of its re)ainin! b%siness.
GSV-1(
+n non-stock corporations where there are no )e)bers with $otin! ri!hts# the $ote of at least a )a<orit" of
the tr%stees in o?ce will be s%?cient a%thori'ation for the corporation to enter into an" transaction
a%thori'ed b" this section.
Section !1. /ower to acquire own shares. - A stock corporation shall ha$e the power to p%rchase or
ac.%ire its own shares for a le!iti)ate corporate p%rpose or p%rposes# incl%din! b%t not li)ited to the
followin! cases- Pro$ided# That the corporation has %nrestricted retained earnin!s in its books to co$er the
shares to be p%rchased or ac.%ired-
1. To eli)inate fractional shares arisin! o%t of stock di$idends1
(. To collect or co)pro)ise an indebtedness to the corporation# arisin! o%t of %npaid s%bscription# in a
delin.%enc" sale# and to p%rchase delin.%ent shares sold d%rin! said sale1 and
*. To pa" dissentin! or withdrawin! stockholders entitled to pa")ent for their shares %nder the pro$isions
of this Code. (a)
Section !2. /ower to in%est corporate funds in another corporation or business or for any other purpose. -
S%b<ect to the pro$isions of this Code# a pri$ate corporation )a" in$est its f%nds in an" other corporation
or b%siness or for an" p%rpose other than the pri)ar" p%rpose for which it was or!ani'ed when appro$ed
b" a )a<orit" of the board of directors or tr%stees and ratied b" the stockholders representin! at least
two-thirds ((@*) of the o%tstandin! capital stock# or b" at least two thirds ((@*) of the )e)bers in the case
of non-stock corporations# at a stockholder;s or )e)ber;s )eetin! d%l" called for the p%rpose. 4ritten
notice of the proposed in$est)ent and the ti)e and place of the )eetin! shall be addressed to each
stockholder or )e)ber at his place of residence as shown on the books of the corporation and deposited
to the addressee in the post o?ce with posta!e prepaid# or ser$ed personall"- Pro$ided# That an"
dissentin! stockholder shall ha$e appraisal ri!ht as pro$ided in this Code- Pro$ided# howe$er# That where
the in$est)ent b" the corporation is reasonabl" necessar" to acco)plish its pri)ar" p%rpose as stated in
the articles of incorporation# the appro$al of the stockholders or )e)bers shall not be necessar". (17 1@(a)
Section !. /ower to declare di%idends. - The board of directors of a stock corporation )a" declare
di$idends o%t of the %nrestricted retained earnin!s which shall be pa"able in cash# in propert"# or in stock
to all stockholders on the basis of o%tstandin! stock held b" the)- Pro$ided# That an" cash di$idends d%e
on delin.%ent stock shall rst be applied to the %npaid balance on the s%bscription pl%s costs and
e&penses# while stock di$idends shall be withheld fro) the delin.%ent stockholder %ntil his %npaid
s%bscription is f%ll" paid- Pro$ided# f%rther# That no stock di$idend shall be iss%ed witho%t the appro$al of
stockholders representin! not less than two-thirds ((@*) of the o%tstandin! capital stock at a re!%lar or
special )eetin! d%l" called for the p%rpose. (15a)
Stock corporations are prohibited fro) retainin! s%rpl%s prots in e&cess of one h%ndred (133>) percent of
their paid-in capital stock# e&cept- (1) when <%stied b" denite corporate e&pansion pro<ects or pro!ra)s
appro$ed b" the board of directors1 or (() when the corporation is prohibited %nder an" loan a!ree)ent
with an" nancial instit%tion or creditor# whether local or forei!n# fro) declarin! di$idends witho%t its@his
consent# and s%ch consent has not "et been sec%red1 or (*) when it can be clearl" shown that s%ch
retention is necessar" %nder special circ%)stances obtainin! in the corporation# s%ch as when there is
need for special reser$e for probable contin!encies. (n)
Section !!. /ower to enter into mana.ement contract. - Eo corporation shall concl%de a )ana!e)ent
contract with another corporation %nless s%ch contract shall ha$e been appro$ed b" the board of directors
and b" stockholders ownin! at least the )a<orit" of the o%tstandin! capital stock# or b" at least a )a<orit"
of the )e)bers in the case of a non-stock corporation# of both the )ana!in! and the )ana!ed
corporation# at a )eetin! d%l" called for the p%rpose- Pro$ided# That (1) where a stockholder or
stockholders representin! the sa)e interest of both the )ana!in! and the )ana!ed corporations own or
control )ore than one-third (1@*) of the total o%tstandin! capital stock entitled to $ote of the )ana!in!
corporation1 or (() where a )a<orit" of the )e)bers of the board of directors of the )ana!in! corporation
also constit%te a )a<orit" of the )e)bers of the board of directors of the )ana!ed corporation# then the
)ana!e)ent contract )%st be appro$ed b" the stockholders of the )ana!ed corporation ownin! at least
two-thirds ((@*) of the total o%tstandin! capital stock entitled to $ote# or b" at least two-thirds ((@*) of the
)e)bers in the case of a non-stock corporation. Eo )ana!e)ent contract shall be entered into for a
period lon!er than $e "ears for an" one ter).
The pro$isions of the ne&t precedin! para!raph shall appl" to an" contract whereb" a corporation
%ndertakes to )ana!e or operate all or s%bstantiall" all of the b%siness of another corporation# whether
s%ch contracts are called ser$ice contracts# operatin! a!ree)ents or otherwise- Pro$ided# howe$er# That
s%ch ser$ice contracts or operatin! a!ree)ents which relate to the e&ploration# de$elop)ent# e&ploitation
or %tili'ation of nat%ral reso%rces )a" be entered into for s%ch periods as )a" be pro$ided b" the
pertinent laws or re!%lations. (n)
GSV-1*
Section !". Bltra $ires acts of corporations. - Eo corporation %nder this Code shall possess or e&ercise an"
corporate powers e&cept those conferred b" this Code or b" its articles of incorporation and e&cept s%ch as
are necessar" or incidental to the e&ercise of the powers so conferred. (n)
TITLE V - B* LA)S
Section !6. !doption of by*laws. - 0$er" corporation for)ed %nder this Code )%st# within one (1) )onth
after receipt of o?cial notice of the iss%ance of its certicate of incorporation b" the Sec%rities and
0&chan!e Co))ission# adopt a code of b"-laws for its !o$ern)ent not inconsistent with this Code. :or the
adoption of b"-laws b" the corporation the a?r)ati$e $ote of the stockholders representin! at least a
)a<orit" of the o%tstandin! capital stock# or of at least a )a<orit" of the )e)bers in case of non-stock
corporations# shall be necessar". The b"-laws shall be si!ned b" the stockholders or )e)bers $otin! for
the) and shall be kept in the principal o?ce of the corporation# s%b<ect to the inspection of the
stockholders or )e)bers d%rin! o?ce ho%rs. A cop" thereof# d%l" certied to b" a )a<orit" of the directors
or tr%stees co%ntersi!ned b" the secretar" of the corporation# shall be led with the Sec%rities and
0&chan!e Co))ission which shall be attached to the ori!inal articles of incorporation.
Eotwithstandin! the pro$isions of the precedin! para!raph# b"-laws )a" be adopted and led prior to
incorporation1 in s%ch case# s%ch b"-laws shall be appro$ed and si!ned b" all the incorporators and
s%b)itted to the Sec%rities and 0&chan!e Co))ission# to!ether with the articles of incorporation.
+n all cases# b"-laws shall be e/ecti$e onl" %pon the iss%ance b" the Sec%rities and 0&chan!e Co))ission
of a certication that the b"-laws are not inconsistent with this Code.
The Sec%rities and 0&chan!e Co))ission shall not accept for lin! the b"-laws or an" a)end)ent thereto
of an" bank# bankin! instit%tion# b%ildin! and loan association# tr%st co)pan"# ins%rance co)pan"# p%blic
%tilit"# ed%cational instit%tion or other special corporations !o$erned b" special laws# %nless acco)panied
b" a certicate of the appropriate !o$ern)ent a!enc" to the e/ect that s%ch b"-laws or a)end)ents are
in accordance with law. ((3a)
Section !#. Contents of by*laws. - S%b<ect to the pro$isions of the Constit%tion# this Code# other special
laws# and the articles of incorporation# a pri$ate corporation )a" pro$ide in its b"-laws for-
1. The ti)e# place and )anner of callin! and cond%ctin! re!%lar or special )eetin!s of the directors or
tr%stees1
(. The ti)e and )anner of callin! and cond%ctin! re!%lar or special )eetin!s of the stockholders or
)e)bers1
*. The re.%ired .%or%) in )eetin!s of stockholders or )e)bers and the )anner of $otin! therein1
,. The for) for pro&ies of stockholders and )e)bers and the )anner of $otin! the)1
2. The .%alications# d%ties and co)pensation of directors or tr%stees# o?cers and e)plo"ees1
5. The ti)e for holdin! the ann%al election of directors of tr%stees and the )ode or )anner of !i$in! notice
thereof1
7. The )anner of election or appoint)ent and the ter) of o?ce of all o?cers other than directors or
tr%stees1
8. The penalties for $iolation of the b"-laws1
A. +n the case of stock corporations# the )anner of iss%in! stock certicates1 and
13. S%ch other )atters as )a" be necessar" for the proper or con$enient transaction of its corporate
b%siness and a/airs. ((1a)
Section !8. !mendments to by*laws. - The board of directors or tr%stees# b" a )a<orit" $ote thereof# and
the owners of at least a )a<orit" of the o%tstandin! capital stock# or at least a )a<orit" of the )e)bers of
a non-stock corporation# at a re!%lar or special )eetin! d%l" called for the p%rpose# )a" a)end or repeal
an" b"-laws or adopt new b"-laws. The owners of two-thirds ((@*) of the o%tstandin! capital stock or two-
thirds ((@*) of the )e)bers in a non-stock corporation )a" dele!ate to the board of directors or tr%stees
the power to a)end or repeal an" b"-laws or adopt new b"-laws- Pro$ided# That an" power dele!ated to
the board of directors or tr%stees to a)end or repeal an" b"-laws or adopt new b"-laws shall be considered
GSV-1,
as re$oked whene$er stockholders ownin! or representin! a )a<orit" of the o%tstandin! capital stock or a
)a<orit" of the )e)bers in non-stock corporations# shall so $ote at a re!%lar or special )eetin!.
4hene$er an" a)end)ent or new b"-laws are adopted# s%ch a)end)ent or new b"-laws shall be
attached to the ori!inal b"-laws in the o?ce of the corporation# and a cop" thereof# d%l" certied %nder
oath b" the corporate secretar" and a )a<orit" of the directors or tr%stees# shall be led with the Sec%rities
and 0&chan!e Co))ission the sa)e to be attached to the ori!inal articles of incorporation and ori!inal b"-
laws.
The a)ended or new b"-laws shall onl" be e/ecti$e %pon the iss%ance b" the Sec%rities and 0&chan!e
Co))ission of a certication that the sa)e are not inconsistent with this Code. (((a and (*a)
TITLE VI - MEETINGS
Section !$. 2inds of meetin.s. - 6eetin!s of directors# tr%stees# stockholders# or )e)bers )a" be re!%lar
or special. (n)
Section "&. Re.ular and special meetin.s of stockholders or members. - =e!%lar )eetin!s of stockholders
or )e)bers shall be held ann%all" on a date &ed in the b"-laws# or if not so &ed# on an" date in April of
e$er" "ear as deter)ined b" the board of directors or tr%stees- Pro$ided# That written notice of re!%lar
)eetin!s shall be sent to all stockholders or )e)bers of record at least two (() weeks prior to the
)eetin!# %nless a di/erent period is re.%ired b" the b"-laws.
Special )eetin!s of stockholders or )e)bers shall be held at an" ti)e dee)ed necessar" or as pro$ided
in the b"-laws- Pro$ided# howe$er# That at least one (1) week written notice shall be sent to all
stockholders or )e)bers# %nless otherwise pro$ided in the b"-laws.
Eotice of an" )eetin! )a" be wai$ed# e&pressl" or i)pliedl"# b" an" stockholder or )e)ber.
4hene$er# for an" ca%se# there is no person a%thori'ed to call a )eetin!# the Sec%rities and 0&chan!e
Co))ission# %pon petition of a stockholder or )e)ber on a showin! of !ood ca%se therefor# )a" iss%e an
order to the petitionin! stockholder or )e)ber directin! hi) to call a )eetin! of the corporation b" !i$in!
proper notice re.%ired b" this Code or b" the b"-laws. The petitionin! stockholder or )e)ber shall preside
thereat %ntil at least a )a<orit" of the stockholders or )e)bers present ha$e chosen one of their n%)ber
as presidin! o?cer. ((,# (5)
Section "1. /lace and time of meetin.s of stockholders of members. - Stockholder;s or )e)ber;s
)eetin!s# whether re!%lar or special# shall be held in the cit" or )%nicipalit" where the principal o?ce of
the corporation is located# and if practicable in the principal o?ce of the corporation- Pro$ided# That 6etro
6anila shall# for p%rposes of this section# be considered a cit" or )%nicipalit".
Eotice of )eetin!s shall be in writin!# and the ti)e and place thereof stated therein.
All proceedin!s had and an" b%siness transacted at an" )eetin! of the stockholders or )e)bers# if within
the powers or a%thorit" of the corporation# shall be $alid e$en if the )eetin! be i)properl" held or called#
pro$ided all the stockholders or )e)bers of the corporation are present or d%l" represented at the
)eetin!. ((, and (2)
Section "2. 3uorum in meetin.s. - Bnless otherwise pro$ided for in this Code or in the b"-laws# a .%or%)
shall consist of the stockholders representin! a )a<orit" of the o%tstandin! capital stock or a )a<orit" of
the )e)bers in the case of non-stock corporations. (n)
Section ". Re.ular and special meetin.s of directors or trustees. - =e!%lar )eetin!s of the board of
directors or tr%stees of e$er" corporation shall be held )onthl"# %nless the b"-laws pro$ide otherwise.
Special )eetin!s of the board of directors or tr%stees )a" be held at an" ti)e %pon the call of the
president or as pro$ided in the b"-laws.
6eetin!s of directors or tr%stees of corporations )a" be held an"where in or o%tside of the Philippines#
%nless the b"-laws pro$ide otherwise. Eotice of re!%lar or special )eetin!s statin! the date# ti)e and
place of the )eetin! )%st be sent to e$er" director or tr%stee at least one (1) da" prior to the sched%led
)eetin!# %nless otherwise pro$ided b" the b"-laws. A director or tr%stee )a" wai$e this re.%ire)ent#
either e&pressl" or i)pliedl". (n)
GSV-12
Section "!. 4ho shall preside at meetin.s. - The president shall preside at all )eetin!s of the directors or
tr%stee as well as of the stockholders or )e)bers# %nless the b"-laws pro$ide otherwise. (n)
Section "". Ri.ht to %ote of pled.ors, mort.a.ors, and administrators. - +n case of pled!ed or )ort!a!ed
shares in stock corporations# the pled!or or )ort!a!or shall ha$e the ri!ht to attend and $ote at )eetin!s
of stockholders# %nless the pled!ee or )ort!a!ee is e&pressl" !i$en b" the pled!or or )ort!a!or s%ch
ri!ht in writin! which is recorded on the appropriate corporate books. (n)
0&ec%tors# ad)inistrators# recei$ers# and other le!al representati$es d%l" appointed b" the co%rt )a"
attend and $ote in behalf of the stockholders or )e)bers witho%t need of an" written pro&". ((7a)
Section "6. ,otin. in case of $oint ownership of stock. - +n case of shares of stock owned <ointl" b" two or
)ore persons# in order to $ote the sa)e# the consent of all the co-owners shall be necessar"# %nless there
is a written pro&"# si!ned b" all the co-owners# a%thori'in! one or so)e of the) or an" other person to
$ote s%ch share or shares- Pro$ided# That when the shares are owned in an "and@or" capacit" b" the
holders thereof# an" one of the <oint owners can $ote said shares or appoint a pro&" therefor. (n)
Section "#. ,otin. ri.ht for treasury shares. - Treas%r" shares shall ha$e no $otin! ri!ht as lon! as s%ch
shares re)ain in the Treas%r". (n)
Section "8. /ro&ies. - Stockholders and )e)bers )a" $ote in person or b" pro&" in all )eetin!s of
stockholders or )e)bers. Pro&ies shall in writin!# si!ned b" the stockholder or )e)ber and led before
the sched%led )eetin! with the corporate secretar". Bnless otherwise pro$ided in the pro&"# it shall be
$alid onl" for the )eetin! for which it is intended. Eo pro&" shall be $alid and e/ecti$e for a period lon!er
than $e (2) "ears at an" one ti)e. (n)
Section "$. ,otin. trusts. - Dne or )ore stockholders of a stock corporation )a" create a $otin! tr%st for
the p%rpose of conferrin! %pon a tr%stee or tr%stees the ri!ht to $ote and other ri!hts pertainin! to the
shares for a period not e&ceedin! $e (2) "ears at an" ti)e- Pro$ided# That in the case of a $otin! tr%st
specicall" re.%ired as a condition in a loan a!ree)ent# said $otin! tr%st )a" be for a period e&ceedin!
$e (2) "ears b%t shall a%to)aticall" e&pire %pon f%ll pa")ent of the loan. A $otin! tr%st a!ree)ent )%st
be in writin! and notari'ed# and shall specif" the ter)s and conditions thereof. A certied cop" of s%ch
a!ree)ent shall be led with the corporation and with the Sec%rities and 0&chan!e Co))ission1
otherwise# said a!ree)ent is ine/ecti$e and %nenforceable. The certicate or certicates of stock co$ered
b" the $otin! tr%st a!ree)ent shall be cancelled and new ones shall be iss%ed in the na)e of the tr%stee
or tr%stees statin! that the" are iss%ed p%rs%ant to said a!ree)ent. +n the books of the corporation# it shall
be noted that the transfer in the na)e of the tr%stee or tr%stees is )ade p%rs%ant to said $otin! tr%st
a!ree)ent.
The tr%stee or tr%stees shall e&ec%te and deli$er to the transferors $otin! tr%st certicates# which shall be
transferable in the sa)e )anner and with the sa)e e/ect as certicates of stock.
The $otin! tr%st a!ree)ent led with the corporation shall be s%b<ect to e&a)ination b" an" stockholder of
the corporation in the sa)e )anner as an" other corporate book or record- Pro$ided# That both the
transferor and the tr%stee or tr%stees )a" e&ercise the ri!ht of inspection of all corporate books and
records in accordance with the pro$isions of this Code.
An" other stockholder )a" transfer his shares to the sa)e tr%stee or tr%stees %pon the ter)s and
conditions stated in the $otin! tr%st a!ree)ent# and there%pon shall be bo%nd b" all the pro$isions of said
a!ree)ent.
Eo $otin! tr%st a!ree)ent shall be entered into for the p%rpose of circ%)$entin! the law a!ainst
)onopolies and ille!al co)binations in restraint of trade or %sed for p%rposes of fra%d.
Bnless e&pressl" renewed# all ri!hts !ranted in a $otin! tr%st a!ree)ent shall a%to)aticall" e&pire at the
end of the a!reed period# and the $otin! tr%st certicates as well as the certicates of stock in the na)e of
the tr%stee or tr%stees shall thereb" be dee)ed cancelled and new certicates of stock shall be reiss%ed in
the na)e of the transferors.
The $otin! tr%stee or tr%stees )a" $ote b" pro&" %nless the a!ree)ent pro$ides otherwise. (*5a)
TITLE VII - STOC+S AND STOC+HOLDERS
Section 6&. 1ubscription contract. - An" contract for the ac.%isition of %niss%ed stock in an e&istin!
corporation or a corporation still to be for)ed shall be dee)ed a s%bscription within the )eanin! of this
Title# notwithstandin! the fact that the parties refer to it as a p%rchase or so)e other contract. (n)
GSV-15
Section 61. /re*incorporation subscription. - A s%bscription for shares of stock of a corporation still to be
for)ed shall be irre$ocable for a period of at least si& (5) )onths fro) the date of s%bscription# %nless all
of the other s%bscribers consent to the re$ocation# or %nless the incorporation of said corporation fails to
)ateriali'e within said period or within a lon!er period as )a" be stip%lated in the contract of s%bscription-
Pro$ided# That no pre-incorporation s%bscription )a" be re$oked after the s%b)ission of the articles of
incorporation to the Sec%rities and 0&chan!e Co))ission. (n)
Section 62. Consideration for stocks. - Stocks shall not be iss%ed for a consideration less than the par or
iss%ed price thereof. Consideration for the iss%ance of stock )a" be an" or a co)bination of an" two or
)ore of the followin!-
1. Act%al cash paid to the corporation1
(. Propert"# tan!ible or intan!ible# act%all" recei$ed b" the corporation and necessar" or
con$enient for its %se and lawf%l p%rposes at a fair $al%ation e.%al to the par or iss%ed $al%e of the
stock iss%ed1
*. Cabor perfor)ed for or ser$ices act%all" rendered to the corporation1
,. Pre$io%sl" inc%rred indebtedness of the corporation1
2. A)o%nts transferred fro) %nrestricted retained earnin!s to stated capital1 and
5. D%tstandin! shares e&chan!ed for stocks in the e$ent of reclassication or con$ersion.
4here the consideration is other than act%al cash# or consists of intan!ible propert" s%ch as patents of
cop"ri!hts# the $al%ation thereof shall initiall" be deter)ined b" the incorporators or the board of
directors# s%b<ect to appro$al b" the Sec%rities and 0&chan!e Co))ission.
Shares of stock shall not be iss%ed in e&chan!e for pro)issor" notes or f%t%re ser$ice.
The sa)e considerations pro$ided for in this section# insofar as the" )a" be applicable# )a" be %sed for
the iss%ance of bonds b" the corporation.
The iss%ed price of no-par $al%e shares )a" be &ed in the articles of incorporation or b" the board of
directors p%rs%ant to a%thorit" conferred %pon it b" the articles of incorporation or the b"-laws# or in the
absence thereof# b" the stockholders representin! at least a )a<orit" of the o%tstandin! capital stock at a
)eetin! d%l" called for the p%rpose. (2 and 15)
Section 6. Certifcate of stock and transfer of shares. - The capital stock of stock corporations shall be
di$ided into shares for which certicates si!ned b" the president or $ice president# co%ntersi!ned b" the
secretar" or assistant secretar"# and sealed with the seal of the corporation shall be iss%ed in accordance
with the b"-laws. Shares of stock so iss%ed are personal propert" and )a" be transferred b" deli$er" of the
certicate or certicates indorsed b" the owner or his attorne"-in-fact or other person le!all" a%thori'ed to
)ake the transfer. Eo transfer# howe$er# shall be $alid# e&cept as between the parties# %ntil the transfer is
recorded in the books of the corporation showin! the na)es of the parties to the transaction# the date of
the transfer# the n%)ber of the certicate or certicates and the n%)ber of shares transferred.
Eo shares of stock a!ainst which the corporation holds an" %npaid clai) shall be transferable in the books
of the corporation. (*2)
Section 6!. "ssuance of stock certifcates. - Eo certicate of stock shall be iss%ed to a s%bscriber %ntil the
f%ll a)o%nt of his s%bscription to!ether with interest and e&penses (in case of delin.%ent shares)# if an" is
d%e# has been paid. (*7)
Section 6". -iability of directors for watered stocks. - An" director or o?cer of a corporation consentin! to
the iss%ance of stocks for a consideration less than its par or iss%ed $al%e or for a consideration in an"
for) other than cash# $al%ed in e&cess of its fair $al%e# or who# ha$in! knowled!e thereof# does not
forthwith e&press his ob<ection in writin! and le the sa)e with the corporate secretar"# shall be solidaril"#
liable with the stockholder concerned to the corporation and its creditors for the di/erence between the
fair $al%e recei$ed at the ti)e of iss%ance of the stock and the par or iss%ed $al%e of the sa)e. (n)
Section 66. "nterest on unpaid subscriptions. - S%bscribers for stock shall pa" to the corporation interest
on all %npaid s%bscriptions fro) the date of s%bscription# if so re.%ired b"# and at the rate of interest &ed
in the b"-laws. +f no rate of interest is &ed in the b"-laws# s%ch rate shall be dee)ed to be the le!al rate.
(*7)
GSV-17
Section 6#. /ayment of balance of subscription. - S%b<ect to the pro$isions of the contract of s%bscription#
the board of directors of an" stock corporation )a" at an" ti)e declare d%e and pa"able to the corporation
%npaid s%bscriptions to the capital stock and )a" collect the sa)e or s%ch percenta!e thereof# in either
case with accr%ed interest# if an"# as it )a" dee) necessar".
Pa")ent of an" %npaid s%bscription or an" percenta!e thereof# to!ether with the interest accr%ed# if an"#
shall be )ade on the date specied in the contract of s%bscription or on the date stated in the call )ade
b" the board. :ail%re to pa" on s%ch date shall render the entire balance d%e and pa"able and shall )ake
the stockholder liable for interest at the le!al rate on s%ch balance# %nless a di/erent rate of interest is
pro$ided in the b"-laws# co)p%ted fro) s%ch date %ntil f%ll pa")ent. +f within thirt" (*3) da"s fro) the
said date no pa")ent is )ade# all stocks co$ered b" said s%bscription shall there%pon beco)e delin.%ent
and shall be s%b<ect to sale as hereinafter pro$ided# %nless the board of directors orders otherwise. (*8)
Section 68. 'elinquency sale. - The board of directors )a"# b" resol%tion# order the sale of delin.%ent
stock and shall specicall" state the a)o%nt d%e on each s%bscription pl%s all accr%ed interest# and the
date# ti)e and place of the sale which shall not be less than thirt" (*3) da"s nor )ore than si&t" (53) da"s
fro) the date the stocks beco)e delin.%ent.
Eotice of said sale# with a cop" of the resol%tion# shall be sent to e$er" delin.%ent stockholder either
personall" or b" re!istered )ail. The sa)e shall f%rther)ore be p%blished once a week for two (()
consec%ti$e weeks in a newspaper of !eneral circ%lation in the pro$ince or cit" where the principal o?ce of
the corporation is located.
Bnless the delin.%ent stockholder pa"s to the corporation# on or before the date specied for the sale of
the delin.%ent stock# the balance d%e on his s%bscription# pl%s accr%ed interest# costs of ad$ertise)ent
and e&penses of sale# or %nless the board of directors otherwise orders# said delin.%ent stock shall be sold
at p%blic a%ction to s%ch bidder who shall o/er to pa" the f%ll a)o%nt of the balance on the s%bscription
to!ether with accr%ed interest# costs of ad$ertise)ent and e&penses of sale# for the s)allest n%)ber of
shares or fraction of a share. The stock so p%rchased shall be transferred to s%ch p%rchaser in the books of
the corporation and a certicate for s%ch stock shall be iss%ed in his fa$or. The re)ainin! shares# if an"#
shall be credited in fa$or of the delin.%ent stockholder who shall likewise be entitled to the iss%ance of a
certicate of stock co$erin! s%ch shares.
Sho%ld there be no bidder at the p%blic a%ction who o/ers to pa" the f%ll a)o%nt of the balance on the
s%bscription to!ether with accr%ed interest# costs of ad$ertise)ent and e&penses of sale# for the s)allest
n%)ber of shares or fraction of a share# the corporation )a"# s%b<ect to the pro$isions of this Code# bid for
the sa)e# and the total a)o%nt d%e shall be credited as paid in f%ll in the books of the corporation. Title to
all the shares of stock co$ered b" the s%bscription shall be $ested in the corporation as treas%r" shares
and )a" be disposed of b" said corporation in accordance with the pro$isions of this Code. (*Aa-,5a)
Section 6$. 4hen sale may be questioned. - Eo action to reco$er delin.%ent stock sold can be s%stained
%pon the !ro%nd of irre!%larit" or defect in the notice of sale# or in the sale itself of the delin.%ent stock#
%nless the part" seekin! to )aintain s%ch action rst pa"s or tenders to the part" holdin! the stock the
s%) for which the sa)e was sold# with interest fro) the date of sale at the le!al rate1 and no s%ch action
shall be )aintained %nless it is co))enced b" the lin! of a co)plaint within si& (5) )onths fro) the date
of sale. (,7a)
Section #&. Court action to reco%er unpaid subscription. - Eothin! in this Code shall pre$ent the
corporation fro) collectin! b" action in a co%rt of proper <%risdiction the a)o%nt d%e on an" %npaid
s%bscription# with accr%ed interest# costs and e&penses. (,Aa)
Section #1. ()ect of delinquency. - Eo delin.%ent stock shall be $oted for or be entitled to $ote or to
representation at an" stockholder;s )eetin!# nor shall the holder thereof be entitled to an" of the ri!hts of
a stockholder e&cept the ri!ht to di$idends in accordance with the pro$isions of this Code# %ntil and %nless
he pa"s the a)o%nt d%e on his s%bscription with accr%ed interest# and the costs and e&penses of
ad$ertise)ent# if an". (23a)
Section #2. Ri.hts of unpaid shares. - Jolders of s%bscribed shares not f%ll" paid which are not delin.%ent
shall ha$e all the ri!hts of a stockholder. (n)
Section #. -ost or destroyed certifcates. - The followin! proced%re shall be followed for the iss%ance b"
a corporation of new certicates of stock in lie% of those which ha$e been lost# stolen or destro"ed-
1. The re!istered owner of a certicate of stock in a corporation or his le!al representati$e shall le
with the corporation an a?da$it in triplicate settin! forth# if possible# the circ%)stances as to how
the certicate was lost# stolen or destro"ed# the n%)ber of shares represented b" s%ch certicate#
the serial n%)ber of the certicate and the na)e of the corporation which iss%ed the sa)e. Je
shall also s%b)it s%ch other infor)ation and e$idence which he )a" dee) necessar"1
GSV-18
(. After $erif"in! the a?da$it and other infor)ation and e$idence with the books of the corporation#
said corporation shall p%blish a notice in a newspaper of !eneral circ%lation p%blished in the place
where the corporation has its principal o?ce# once a week for three (*) consec%ti$e weeks at the
e&pense of the re!istered owner of the certicate of stock which has been lost# stolen or destro"ed.
The notice shall state the na)e of said corporation# the na)e of the re!istered owner and the serial
n%)ber of said certicate# and the n%)ber of shares represented b" s%ch certicate# and that after
the e&piration of one (1) "ear fro) the date of the last p%blication# if no contest has been presented
to said corporation re!ardin! said certicate of stock# the ri!ht to )ake s%ch contest shall be barred
and said corporation shall cancel in its books the certicate of stock which has been lost# stolen or
destro"ed and iss%e in lie% thereof new certicate of stock# %nless the re!istered owner les a bond
or other sec%rit" in lie% thereof as )a" be re.%ired# e/ecti$e for a period of one (1) "ear# for s%ch
a)o%nt and in s%ch for) and with s%ch s%reties as )a" be satisfactor" to the board of directors# in
which case a new certicate )a" be iss%ed e$en before the e&piration of the one (1) "ear period
pro$ided herein- Pro$ided# That if a contest has been presented to said corporation or if an action is
pendin! in co%rt re!ardin! the ownership of said certicate of stock which has been lost# stolen or
destro"ed# the iss%ance of the new certicate of stock in lie% thereof shall be s%spended %ntil the
nal decision b" the co%rt re!ardin! the ownership of said certicate of stock which has been lost#
stolen or destro"ed.
0&cept in case of fra%d# bad faith# or ne!li!ence on the part of the corporation and its o?cers# no
action )a" be bro%!ht a!ainst an" corporation which shall ha$e iss%ed certicate of stock in lie% of
those lost# stolen or destro"ed p%rs%ant to the proced%re abo$e-described. (=.A. (31a)
TITLE VIII - CORPORATE BOO+S AND RECORDS
Section #!. 5ooks to be kept0 stock transfer a.ent. - 0$er" corporation shall keep and caref%ll" preser$e
at its principal o?ce a record of all b%siness transactions and )in%tes of all )eetin!s of stockholders or
)e)bers# or of the board of directors or tr%stees# in which shall be set forth in detail the ti)e and place of
holdin! the )eetin!# how a%thori'ed# the notice !i$en# whether the )eetin! was re!%lar or special# if
special its ob<ect# those present and absent# and e$er" act done or ordered done at the )eetin!. Bpon the
de)and of an" director# tr%stee# stockholder or )e)ber# the ti)e when an" director# tr%stee# stockholder
or )e)ber entered or left the )eetin! )%st be noted in the )in%tes1 and on a si)ilar de)and# the "eas
and na"s )%st be taken on an" )otion or proposition# and a record thereof caref%ll" )ade. The protest of
an" director# tr%stee# stockholder or )e)ber on an" action or proposed action )%st be recorded in f%ll on
his de)and.
The records of all b%siness transactions of the corporation and the )in%tes of an" )eetin!s shall be open
to inspection b" an" director# tr%stee# stockholder or )e)ber of the corporation at reasonable ho%rs on
b%siness da"s and he )a" de)and# in writin!# for a cop" of e&cerpts fro) said records or )in%tes# at his
e&pense.
An" o?cer or a!ent of the corporation who shall ref%se to allow an" director# tr%stees# stockholder or
)e)ber of the corporation to e&a)ine and cop" e&cerpts fro) its records or )in%tes# in accordance with
the pro$isions of this Code# shall be liable to s%ch director# tr%stee# stockholder or )e)ber for da)a!es#
and in addition# shall be !%ilt" of an o/ense which shall be p%nishable %nder Section 1,, of this Code-
Pro$ided# That if s%ch ref%sal is )ade p%rs%ant to a resol%tion or order of the board of directors or tr%stees#
the liabilit" %nder this section for s%ch action shall be i)posed %pon the directors or tr%stees who $oted for
s%ch ref%sal- and Pro$ided# f%rther# That it shall be a defense to an" action %nder this section that the
person de)andin! to e&a)ine and cop" e&cerpts fro) the corporation;s records and )in%tes has
i)properl" %sed an" infor)ation sec%red thro%!h an" prior e&a)ination of the records or )in%tes of s%ch
corporation or of an" other corporation# or was not actin! in !ood faith or for a le!iti)ate p%rpose in
)akin! his de)and.
Stock corporations )%st also keep a book to be known as the "stock and transfer book"# in which )%st be
kept a record of all stocks in the na)es of the stockholders alphabeticall" arran!ed1 the install)ents paid
and %npaid on all stock for which s%bscription has been )ade# and the date of pa")ent of an" install)ent1
a state)ent of e$er" alienation# sale or transfer of stock )ade# the date thereof# and b" and to who)
)ade1 and s%ch other entries as the b"-laws )a" prescribe. The stock and transfer book shall be kept in
the principal o?ce of the corporation or in the o?ce of its stock transfer a!ent and shall be open for
inspection b" an" director or stockholder of the corporation at reasonable ho%rs on b%siness da"s.
Eo stock transfer a!ent or one en!a!ed principall" in the b%siness of re!isterin! transfers of stocks in
behalf of a stock corporation shall be allowed to operate in the Philippines %nless he sec%res a license fro)
the Sec%rities and 0&chan!e Co))ission and pa"s a fee as )a" be &ed b" the Co))ission# which shall
be renewable ann%all"- Pro$ided# That a stock corporation is not precl%ded fro) perfor)in! or )akin!
transfer of its own stocks# in which case all the r%les and re!%lations i)posed on stock transfer a!ents#
e&cept the pa")ent of a license fee herein pro$ided# shall be applicable. (21a and *(a1 P.H. Eo. (58.)
GSV-1A
Section #". Ri.ht to fnancial statements. - 4ithin ten (13) da"s fro) receipt of a written re.%est of an"
stockholder or )e)ber# the corporation shall f%rnish to hi) its )ost recent nancial state)ent# which
shall incl%de a balance sheet as of the end of the last ta&able "ear and a prot or loss state)ent for said
ta&able "ear# showin! in reasonable detail its assets and liabilities and the res%lt of its operations.
At the re!%lar )eetin! of stockholders or )e)bers# the board of directors or tr%stees shall present to s%ch
stockholders or )e)bers a nancial report of the operations of the corporation for the precedin! "ear#
which shall incl%de nancial state)ents# d%l" si!ned and certied b" an independent certied p%blic
acco%ntant.
Jowe$er# if the paid-%p capital of the corporation is less than P23#333.33# the nancial state)ents )a" be
certied %nder oath b" the treas%rer or an" responsible o?cer of the corporation. (n)
TITLE I, - MERGER AND CONSOLIDATION
Section #6. /lan or mer.er of consolidation. - Two or )ore corporations )a" )er!e into a sin!le
corporation which shall be one of the constit%ent corporations or )a" consolidate into a new sin!le
corporation which shall be the consolidated corporation.
The board of directors or tr%stees of each corporation# part" to the )er!er or consolidation# shall appro$e
a plan of )er!er or consolidation settin! forth the followin!-
1. The na)es of the corporations proposin! to )er!e or consolidate# hereinafter referred to as the
constit%ent corporations1
(. The ter)s of the )er!er or consolidation and the )ode of carr"in! the sa)e into e/ect1
*. A state)ent of the chan!es# if an"# in the articles of incorporation of the s%r$i$in! corporation in
case of )er!er1 and# with respect to the consolidated corporation in case of consolidation# all the
state)ents re.%ired to be set forth in the articles of incorporation for corporations or!ani'ed %nder
this Code1 and
,. S%ch other pro$isions with respect to the proposed )er!er or consolidation as are dee)ed
necessar" or desirable. (n)
Section ##. 1tockholder's or member's appro%al. - Bpon appro$al b" )a<orit" $ote of each of the board of
directors or tr%stees of the constit%ent corporations of the plan of )er!er or consolidation# the sa)e shall
be s%b)itted for appro$al b" the stockholders or )e)bers of each of s%ch corporations at separate
corporate )eetin!s d%l" called for the p%rpose. Eotice of s%ch )eetin!s shall be !i$en to all stockholders
or )e)bers of the respecti$e corporations# at least two (() weeks prior to the date of the )eetin!# either
personall" or b" re!istered )ail. Said notice shall state the p%rpose of the )eetin! and shall incl%de a
cop" or a s%))ar" of the plan of )er!er or consolidation. The a?r)ati$e $ote of stockholders
representin! at least two-thirds ((@*) of the o%tstandin! capital stock of each corporation in the case of
stock corporations or at least two-thirds ((@*) of the )e)bers in the case of non-stock corporations shall
be necessar" for the appro$al of s%ch plan. An" dissentin! stockholder in stock corporations )a" e&ercise
his appraisal ri!ht in accordance with the Code- Pro$ided# That if after the appro$al b" the stockholders of
s%ch plan# the board of directors decides to abandon the plan# the appraisal ri!ht shall be e&tin!%ished.
An" a)end)ent to the plan of )er!er or consolidation )a" be )ade# pro$ided s%ch a)end)ent is
appro$ed b" )a<orit" $ote of the respecti$e boards of directors or tr%stees of all the constit%ent
corporations and ratied b" the a?r)ati$e $ote of stockholders representin! at least two-thirds ((@*) of
the o%tstandin! capital stock or of two-thirds ((@*) of the )e)bers of each of the constit%ent corporations.
S%ch plan# to!ether with an" a)end)ent# shall be considered as the a!ree)ent of )er!er or
consolidation. (n)
Section #8. Articles of )er!er or consolidation. - After the appro$al b" the stockholders or )e)bers as
re.%ired b" the precedin! section# articles of )er!er or articles of consolidation shall be e&ec%ted b" each
of the constit%ent corporations# to be si!ned b" the president or $ice-president and certied b" the
secretar" or assistant secretar" of each corporation settin! forth-
1. The plan of the )er!er or the plan of consolidation1
(. As to stock corporations# the n%)ber of shares o%tstandin!# or in the case of non-stock
corporations# the n%)ber of )e)bers1 and
*. As to each corporation# the n%)ber of shares or )e)bers $otin! for and a!ainst s%ch plan#
respecti$el". (n)
GSV-(3
Section #$. 0/ecti$it" of )er!er or consolidation. - The articles of )er!er or of consolidation# si!ned and
certied as herein abo$e re.%ired# shall be s%b)itted to the Sec%rities and 0&chan!e Co))ission in
.%adr%plicate for its appro$al- Pro$ided# That in the case of )er!er or consolidation of banks or bankin!
instit%tions# b%ildin! and loan associations# tr%st co)panies# ins%rance co)panies# p%blic %tilities#
ed%cational instit%tions and other special corporations !o$erned b" special laws# the fa$orable
reco))endation of the appropriate !o$ern)ent a!enc" shall rst be obtained. +f the Co))ission is
satised that the )er!er or consolidation of the corporations concerned is not inconsistent with the
pro$isions of this Code and e&istin! laws# it shall iss%e a certicate of )er!er or of consolidation# at which
ti)e the )er!er or consolidation shall be e/ecti$e.
+f# %pon in$esti!ation# the Sec%rities and 0&chan!e Co))ission has reason to belie$e that the proposed
)er!er or consolidation is contrar" to or inconsistent with the pro$isions of this Code or e&istin! laws# it
shall set a hearin! to !i$e the corporations concerned the opport%nit" to be heard. 4ritten notice of the
date# ti)e and place of hearin! shall be !i$en to each constit%ent corporation at least two (() weeks
before said hearin!. The Co))ission shall thereafter proceed as pro$ided in this Code. (n)
Section 8&. 0/ects of )er!er or consolidation. - The )er!er or consolidation shall ha$e the followin!
e/ects-
1. The constit%ent corporations shall beco)e a sin!le corporation which# in case of )er!er# shall be
the s%r$i$in! corporation desi!nated in the plan of )er!er1 and# in case of consolidation# shall be
the consolidated corporation desi!nated in the plan of consolidation1
(. The separate e&istence of the constit%ent corporations shall cease# e&cept that of the s%r$i$in!
or the consolidated corporation1
*. The s%r$i$in! or the consolidated corporation shall possess all the ri!hts# pri$ile!es# i))%nities
and powers and shall be s%b<ect to all the d%ties and liabilities of a corporation or!ani'ed %nder this
Code1
,. The s%r$i$in! or the consolidated corporation shall there%pon and thereafter possess all the
ri!hts# pri$ile!es# i))%nities and franchises of each of the constit%ent corporations1 and all
propert"# real or personal# and all recei$ables d%e on whate$er acco%nt# incl%din! s%bscriptions to
shares and other choses in action# and all and e$er" other interest of# or belon!in! to# or d%e to
each constit%ent corporation# shall be dee)ed transferred to and $ested in s%ch s%r$i$in! or
consolidated corporation witho%t f%rther act or deed1 and
2. The s%r$i$in! or consolidated corporation shall be responsible and liable for all the liabilities and
obli!ations of each of the constit%ent corporations in the sa)e )anner as if s%ch s%r$i$in! or
consolidated corporation had itself inc%rred s%ch liabilities or obli!ations1 and an" pendin! clai)#
action or proceedin! bro%!ht b" or a!ainst an" of s%ch constit%ent corporations )a" be prosec%ted
b" or a!ainst the s%r$i$in! or consolidated corporation. The ri!hts of creditors or liens %pon the
propert" of an" of s%ch constit%ent corporations shall not be i)paired b" s%ch )er!er or
consolidation. (n)
TITLE , - APPRAISAL RIGHT
Section 81. +nstances of appraisal ri!ht. - An" stockholder of a corporation shall ha$e the ri!ht to dissent
and de)and pa")ent of the fair $al%e of his shares in the followin! instances-
1. +n case an" a)end)ent to the articles of incorporation has the e/ect of chan!in! or restrictin!
the ri!hts of an" stockholder or class of shares# or of a%thori'in! preferences in an" respect
s%perior to those of o%tstandin! shares of an" class# or of e&tendin! or shortenin! the ter) of
corporate e&istence1
(. +n case of sale# lease# e&chan!e# transfer# )ort!a!e# pled!e or other disposition of all or
s%bstantiall" all of the corporate propert" and assets as pro$ided in the Code1 and
*. +n case of )er!er or consolidation. (n)
Section 82. 6ow ri.ht is e&ercised. - The appraisal ri!ht )a" be e&ercised b" an" stockholder who shall
ha$e $oted a!ainst the proposed corporate action# b" )akin! a written de)and on the corporation within
thirt" (*3) da"s after the date on which the $ote was taken for pa")ent of the fair $al%e of his shares-
Pro$ided# That fail%re to )ake the de)and within s%ch period shall be dee)ed a wai$er of the appraisal
ri!ht. +f the proposed corporate action is i)ple)ented or a/ected# the corporation shall pa" to s%ch
stockholder# %pon s%rrender of the certicate or certicates of stock representin! his shares# the fair $al%e
thereof as of the da" prior to the date on which the $ote was taken# e&cl%din! an" appreciation or
depreciation in anticipation of s%ch corporate action.
GSV-(1
+f within a period of si&t" (53) da"s fro) the date the corporate action was appro$ed b" the stockholders#
the withdrawin! stockholder and the corporation cannot a!ree on the fair $al%e of the shares# it shall be
deter)ined and appraised b" three (*) disinterested persons# one of who) shall be na)ed b" the
stockholder# another b" the corporation# and the third b" the two th%s chosen. The ndin!s of the )a<orit"
of the appraisers shall be nal# and their award shall be paid b" the corporation within thirt" (*3) da"s
after s%ch award is )ade- Pro$ided# That no pa")ent shall be )ade to an" dissentin! stockholder %nless
the corporation has %nrestricted retained earnin!s in its books to co$er s%ch pa")ent- and Pro$ided#
f%rther# That %pon pa")ent b" the corporation of the a!reed or awarded price# the stockholder shall
forthwith transfer his shares to the corporation. (n)
Section 8. ()ect of demand and termination of ri.ht. - :ro) the ti)e of de)and for pa")ent of the fair
$al%e of a stockholder;s shares %ntil either the abandon)ent of the corporate action in$ol$ed or the
p%rchase of the said shares b" the corporation# all ri!hts accr%in! to s%ch shares# incl%din! $otin! and
di$idend ri!hts# shall be s%spended in accordance with the pro$isions of this Code# e&cept the ri!ht of s%ch
stockholder to recei$e pa")ent of the fair $al%e thereof- Pro$ided# That if the dissentin! stockholder is not
paid the $al%e of his shares within *3 da"s after the award# his $otin! and di$idend ri!hts shall
i))ediatel" be restored. (n)
Section 8!. 4hen ri.ht to payment ceases. - Eo de)and for pa")ent %nder this Title )a" be withdrawn
%nless the corporation consents thereto. +f# howe$er# s%ch de)and for pa")ent is withdrawn with the
consent of the corporation# or if the proposed corporate action is abandoned or rescinded b" the
corporation or disappro$ed b" the Sec%rities and 0&chan!e Co))ission where s%ch appro$al is necessar"#
or if the Sec%rities and 0&chan!e Co))ission deter)ines that s%ch stockholder is not entitled to the
appraisal ri!ht# then the ri!ht of said stockholder to be paid the fair $al%e of his shares shall cease# his
stat%s as a stockholder shall there%pon be restored# and all di$idend distrib%tions which wo%ld ha$e
accr%ed on his shares shall be paid to hi). (n)
Section 8". 4ho bears costs of appraisal. - The costs and e&penses of appraisal shall be borne b" the
corporation# %nless the fair $al%e ascertained b" the appraisers is appro&i)atel" the sa)e as the price
which the corporation )a" ha$e o/ered to pa" the stockholder# in which case the" shall be borne b" the
latter. +n the case of an action to reco$er s%ch fair $al%e# all costs and e&penses shall be assessed a!ainst
the corporation# %nless the ref%sal of the stockholder to recei$e pa")ent was %n<%stied. (n)
Section 86. Notation on certifcates0 ri.hts of transferee. - 4ithin ten (13) da"s after de)andin! pa")ent
for his shares# a dissentin! stockholder shall s%b)it the certicates of stock representin! his shares to the
corporation for notation thereon that s%ch shares are dissentin! shares. Jis fail%re to do so shall# at the
option of the corporation# ter)inate his ri!hts %nder this Title. +f shares represented b" the certicates
bearin! s%ch notation are transferred# and the certicates conse.%entl" cancelled# the ri!hts of the
transferor as a dissentin! stockholder %nder this Title shall cease and the transferee shall ha$e all the
ri!hts of a re!%lar stockholder1 and all di$idend distrib%tions which wo%ld ha$e accr%ed on s%ch shares
shall be paid to the transferee. (n)
TITLE ,I - NON-STOC+ CORPORATIONS
Section 8#. 9enition. - :or the p%rposes of this Code# a non-stock corporation is one where no part of its
inco)e is distrib%table as di$idends to its )e)bers# tr%stees# or o?cers# s%b<ect to the pro$isions of this
Code on dissol%tion- Pro$ided# That an" prot which a non-stock corporation )a" obtain as an incident to
its operations shall# whene$er necessar" or proper# be %sed for the f%rtherance of the p%rpose or p%rposes
for which the corporation was or!ani'ed# s%b<ect to the pro$isions of this Title.
The pro$isions !o$ernin! stock corporation# when pertinent# shall be applicable to non-stock corporations#
e&cept as )a" be co$ered b" specic pro$isions of this Title. (n)
Section 88. P%rposes. - Eon-stock corporations )a" be for)ed or or!ani'ed for charitable# reli!io%s#
ed%cational# professional# c%lt%ral# fraternal# literar"# scientic# social# ci$ic ser$ice# or si)ilar p%rposes#
like trade# ind%str"# a!ric%lt%ral and like cha)bers# or an" co)bination thereof# s%b<ect to the special
pro$isions of this Title !o$ernin! partic%lar classes of non-stock corporations. (n)
CHAPTER I
MEMBERS
Section 8$. Ri.ht to %ote. - The ri!ht of the )e)bers of an" class or classes to $ote )a" be li)ited#
broadened or denied to the e&tent specied in the articles of incorporation or the b"-laws. Bnless so
li)ited# broadened or denied# each )e)ber# re!ardless of class# shall be entitled to one $ote.
Bnless otherwise pro$ided in the articles of incorporation or the b"-laws# a )e)ber )a" $ote b" pro&" in
accordance with the pro$isions of this Code. (n)
GSV-((
Votin! b" )ail or other si)ilar )eans b" )e)bers of non-stock corporations )a" be a%thori'ed b" the b"-
laws of non-stock corporations with the appro$al of# and %nder s%ch conditions which )a" be prescribed
b"# the Sec%rities and 0&chan!e Co))ission.
Section $&. Eon-transferabilit" of )e)bership. - 6e)bership in a non-stock corporation and all ri!hts
arisin! therefro) are personal and non-transferable# %nless the articles of incorporation or the b"-laws
otherwise pro$ide. (n)
Section $1. Ter)ination of )e)bership. - 6e)bership shall be ter)inated in the )anner and for the
ca%ses pro$ided in the articles of incorporation or the b"-laws. Ter)ination of )e)bership shall ha$e the
e/ect of e&tin!%ishin! all ri!hts of a )e)ber in the corporation or in its propert"# %nless otherwise
pro$ided in the articles of incorporation or the b"-laws. (n)
CHAPTER II
TR(STEES AND OFFICES
Section $2. (lection and term of trustees. - Bnless otherwise pro$ided in the articles of incorporation or
the b"-laws# the board of tr%stees of non-stock corporations# which )a" be )ore than fteen (12) in
n%)ber as )a" be &ed in their articles of incorporation or b"-laws# shall# as soon as or!ani'ed# so classif"
the)sel$es that the ter) of o?ce of one-third (1@*) of their n%)ber shall e&pire e$er" "ear1 and
s%bse.%ent elections of tr%stees co)prisin! one-third (1@*) of the board of tr%stees shall be held ann%all"
and tr%stees so elected shall ha$e a ter) of three (*) "ears. Tr%stees thereafter elected to ll $acancies
occ%rrin! before the e&piration of a partic%lar ter) shall hold o?ce onl" for the %ne&pired period.
Eo person shall be elected as tr%stee %nless he is a )e)ber of the corporation.
Bnless otherwise pro$ided in the articles of incorporation or the b"-laws# o?cers of a non-stock corporation
)a" be directl" elected b" the )e)bers. (n)
Section $. /lace of meetin.s. - The b"-laws )a" pro$ide that the )e)bers of a non-stock corporation
)a" hold their re!%lar or special )eetin!s at an" place e$en o%tside the place where the principal o?ce of
the corporation is located- Pro$ided# That proper notice is sent to all )e)bers indicatin! the date# ti)e
and place of the )eetin!- and Pro$ided# f%rther# That the place of )eetin! shall be within the Philippines.
(n)
CHAPTER III
DISTRIB(TION OF ASSETS IN NON-STOC+ CORPORATIONS
Section $!. Rules of distribution. - +n case dissol%tion of a non-stock corporation in accordance with the
pro$isions of this Code# its assets shall be applied and distrib%ted as follows-
1. All liabilities and obli!ations of the corporation shall be paid# satised and dischar!ed# or
ade.%ate pro$ision shall be )ade therefore1
(. Assets held b" the corporation %pon a condition re.%irin! ret%rn# transfer or con$e"ance# and
which condition occ%rs b" reason of the dissol%tion# shall be ret%rned# transferred or con$e"ed in
accordance with s%ch re.%ire)ents1
*. Assets recei$ed and held b" the corporation s%b<ect to li)itations per)ittin! their %se onl" for
charitable# reli!io%s# bene$olent# ed%cational or si)ilar p%rposes# b%t not held %pon a condition
re.%irin! ret%rn# transfer or con$e"ance b" reason of the dissol%tion# shall be transferred or
con$e"ed to one or )ore corporations# societies or or!ani'ations en!a!ed in acti$ities in the
Philippines s%bstantiall" si)ilar to those of the dissol$in! corporation accordin! to a plan of
distrib%tion adopted p%rs%ant to this Chapter1
,. Assets other than those )entioned in the precedin! para!raphs# if an"# shall be distrib%ted in
accordance with the pro$isions of the articles of incorporation or the b"-laws# to the e&tent that the
articles of incorporation or the b"-laws# deter)ine the distrib%ti$e ri!hts of )e)bers# or an" class
or classes of )e)bers# or pro$ide for distrib%tion1 and
2. +n an" other case# assets )a" be distrib%ted to s%ch persons# societies# or!ani'ations or
corporations# whether or not or!ani'ed for prot# as )a" be specied in a plan of distrib%tion
adopted p%rs%ant to this Chapter. (n)
Section $". /lan of distribution of assets. - A plan pro$idin! for the distrib%tion of assets# not inconsistent
with the pro$isions of this Title# )a" be adopted b" a non-stock corporation in the process of dissol%tion in
the followin! )anner-
GSV-(*
The board of tr%stees shall# b" )a<orit" $ote# adopt a resol%tion reco))endin! a plan of distrib%tion and
directin! the s%b)ission thereof to a $ote at a re!%lar or special )eetin! of )e)bers ha$in! $otin! ri!hts.
4ritten notice settin! forth the proposed plan of distrib%tion or a s%))ar" thereof and the date# ti)e and
place of s%ch )eetin! shall be !i$en to each )e)ber entitled to $ote# within the ti)e and in the )anner
pro$ided in this Code for the !i$in! of notice of )eetin!s to )e)bers. S%ch plan of distrib%tion shall be
adopted %pon appro$al of at least two-thirds ((@*) of the )e)bers ha$in! $otin! ri!hts present or
represented b" pro&" at s%ch )eetin!. (n)
TITLE ,II - CLOSE CORPORATIONS
Section $6. 'efnition and applicability of Title. - A close corporation# within the )eanin! of this Code# is
one whose articles of incorporation pro$ide that- (1) All the corporation;s iss%ed stock of all classes#
e&cl%si$e of treas%r" shares# shall be held of record b" not )ore than a specied n%)ber of persons# not
e&ceedin! twent" ((3)1 (() all the iss%ed stock of all classes shall be s%b<ect to one or )ore specied
restrictions on transfer per)itted b" this Title1 and (*) The corporation shall not list in an" stock e&chan!e
or )ake an" p%blic o/erin! of an" of its stock of an" class. Eotwithstandin! the fore!oin!# a corporation
shall not be dee)ed a close corporation when at least two-thirds ((@*) of its $otin! stock or $otin! ri!hts is
owned or controlled b" another corporation which is not a close corporation within the )eanin! of this
Code.
An" corporation )a" be incorporated as a close corporation# e&cept )inin! or oil co)panies# stock
e&chan!es# banks# ins%rance co)panies# p%blic %tilities# ed%cational instit%tions and corporations declared
to be $ested with p%blic interest in accordance with the pro$isions of this Code.
The pro$isions of this Title shall pri)aril" !o$ern close corporations- Pro$ided# That the pro$isions of other
Titles of this Code shall appl" s%ppletoril" e&cept insofar as this Title otherwise pro$ides.
Section $#. !rticles of incorporation. - The articles of incorporation of a close corporation )a" pro$ide-
1. :or a classication of shares or ri!hts and the .%alications for ownin! or holdin! the sa)e and
restrictions on their transfers as )a" be stated therein# s%b<ect to the pro$isions of the followin!
section1
(. :or a classication of directors into one or )ore classes# each of who) )a" be $oted for and
elected solel" b" a partic%lar class of stock1 and
*. :or a !reater .%or%) or $otin! re.%ire)ents in )eetin!s of stockholders or directors than those
pro$ided in this Code.
The articles of incorporation of a close corporation )a" pro$ide that the b%siness of the corporation shall
be )ana!ed b" the stockholders of the corporation rather than b" a board of directors. So lon! as this
pro$ision contin%es in e/ect-
1. Eo )eetin! of stockholders need be called to elect directors1
(. Bnless the conte&t clearl" re.%ires otherwise# the stockholders of the corporation shall be
dee)ed to be directors for the p%rpose of appl"in! the pro$isions of this Code1 and
*. The stockholders of the corporation shall be s%b<ect to all liabilities of directors.
The articles of incorporation )a" likewise pro$ide that all o?cers or e)plo"ees or that specied
o?cers or e)plo"ees shall be elected or appointed b" the stockholders# instead of b" the board of
directors.
Section $8. ,alidity of restrictions on transfer of shares. - =estrictions on the ri!ht to transfer shares )%st
appear in the articles of incorporation and in the b"-laws as well as in the certicate of stock1 otherwise#
the sa)e shall not be bindin! on an" p%rchaser thereof in !ood faith. Said restrictions shall not be )ore
onero%s than !rantin! the e&istin! stockholders or the corporation the option to p%rchase the shares of the
transferrin! stockholder with s%ch reasonable ter)s# conditions or period stated therein. +f %pon the
e&piration of said period# the e&istin! stockholders or the corporation fails to e&ercise the option to
p%rchase# the transferrin! stockholder )a" sell his shares to an" third person.
Section $$. ()ects of issuance or transfer of stock in breach of qualifyin. conditions. -
GSV-(,
1. +f stock of a close corporation is iss%ed or transferred to an" person who is not entitled %nder an"
pro$ision of the articles of incorporation to be a holder of record of its stock# and if the certicate for
s%ch stock conspic%o%sl" shows the .%alications of the persons entitled to be holders of record
thereof# s%ch person is concl%si$el" pres%)ed to ha$e notice of the fact of his ineli!ibilit" to be a
stockholder.
(. +f the articles of incorporation of a close corporation states the n%)ber of persons# not e&ceedin!
twent" ((3)# who are entitled to be holders of record of its stock# and if the certicate for s%ch stock
conspic%o%sl" states s%ch n%)ber# and if the iss%ance or transfer of stock to an" person wo%ld
ca%se the stock to be held b" )ore than s%ch n%)ber of persons# the person to who) s%ch stock is
iss%ed or transferred is concl%si$el" pres%)ed to ha$e notice of this fact.
*. +f a stock certicate of an" close corporation conspic%o%sl" shows a restriction on transfer of
stock of the corporation# the transferee of the stock is concl%si$el" pres%)ed to ha$e notice of the
fact that he has ac.%ired stock in $iolation of the restriction# if s%ch ac.%isition $iolates the
restriction.
,. 4hene$er an" person to who) stock of a close corporation has been iss%ed or transferred has#
or is concl%si$el" pres%)ed %nder this section to ha$e# notice either (a) that he is a person not
eli!ible to be a holder of stock of the corporation# or (b) that transfer of stock to hi) wo%ld ca%se
the stock of the corporation to be held b" )ore than the n%)ber of persons per)itted b" its articles
of incorporation to hold stock of the corporation# or (c) that the transfer of stock is in $iolation of a
restriction on transfer of stock# the corporation )a"# at its option# ref%se to re!ister the transfer of
stock in the na)e of the transferee.
2. The pro$isions of s%bsection (,) shall not be applicable if the transfer of stock# tho%!h contrar" to
s%bsections (1)# (() or (*)# has been consented to b" all the stockholders of the close corporation# or
if the close corporation has a)ended its articles of incorporation in accordance with this Title.
5. The ter) "transfer"# as %sed in this section# is not li)ited to a transfer for $al%e.
7. The pro$isions of this section shall not i)pair an" ri!ht which the transferee )a" ha$e to rescind
the transfer or to reco$er %nder an" applicable warrant"# e&press or i)plied.
Section 1&&. !.reements by stockholders. -
1. A!ree)ents b" and a)on! stockholders e&ec%ted before the for)ation and or!ani'ation of a
close corporation# si!ned b" all stockholders# shall s%r$i$e the incorporation of s%ch corporation and
shall contin%e to be $alid and bindin! between and a)on! s%ch stockholders# if s%ch be their
intent# to the e&tent that s%ch a!ree)ents are not inconsistent with the articles of incorporation#
irrespecti$e of where the pro$isions of s%ch a!ree)ents are contained# e&cept those re.%ired b"
this Title to be e)bodied in said articles of incorporation.
(. An a!ree)ent between two or )ore stockholders# if in writin! and si!ned b" the parties thereto#
)a" pro$ide that in e&ercisin! an" $otin! ri!hts# the shares held b" the) shall be $oted as therein
pro$ided# or as the" )a" a!ree# or as deter)ined in accordance with a proced%re a!reed %pon b"
the).
*. Eo pro$ision in an" written a!ree)ent si!ned b" the stockholders# relatin! to an" phase of the
corporate a/airs# shall be in$alidated as between the parties on the !ro%nd that its e/ect is to
)ake the) partners a)on! the)sel$es.
,. A written a!ree)ent a)on! so)e or all of the stockholders in a close corporation shall not be
in$alidated on the !ro%nd that it so relates to the cond%ct of the b%siness and a/airs of the
corporation as to restrict or interfere with the discretion or powers of the board of directors-
Pro$ided# That s%ch a!ree)ent shall i)pose on the stockholders who are parties thereto the
liabilities for )ana!erial acts i)posed b" this Code on directors.
2. To the e&tent that the stockholders are acti$el" en!a!ed in the )ana!e)ent or operation of the
b%siness and a/airs of a close corporation# the stockholders shall be held to strict d%ciar" d%ties to
each other and a)on! the)sel$es. Said stockholders shall be personall" liable for corporate torts
%nless the corporation has obtained reasonabl" ade.%ate liabilit" ins%rance.
Section 1&1. 4hen board meetin. is unnecessary or improperly held. - Bnless the b"-laws pro$ide
otherwise# an" action b" the directors of a close corporation witho%t a )eetin! shall ne$ertheless be
dee)ed $alid if-
1. Hefore or after s%ch action is taken# written consent thereto is si!ned b" all the directors1 or
GSV-(2
(. All the stockholders ha$e act%al or i)plied knowled!e of the action and )ake no pro)pt
ob<ection thereto in writin!1 or
*. The directors are acc%sto)ed to take infor)al action with the e&press or i)plied ac.%iescence of
all the stockholders1 or
,. All the directors ha$e e&press or i)plied knowled!e of the action in .%estion and none of the)
)akes pro)pt ob<ection thereto in writin!.
+f a director;s )eetin! is held witho%t proper call or notice# an action taken therein within the corporate
powers is dee)ed ratied b" a director who failed to attend# %nless he pro)ptl" les his written ob<ection
with the secretar" of the corporation after ha$in! knowled!e thereof.
Section 1&2. /re*empti%e ri.ht in close corporations. - The pre-e)pti$e ri!ht of stockholders in close
corporations shall e&tend to all stock to be iss%ed# incl%din! reiss%ance of treas%r" shares# whether for
)one"# propert" or personal ser$ices# or in pa")ent of corporate debts# %nless the articles of incorporation
pro$ide otherwise.
Section 1&. !mendment of articles of incorporation. - An" a)end)ent to the articles of incorporation
which seeks to delete or re)o$e an" pro$ision re.%ired b" this Title to be contained in the articles of
incorporation or to red%ce a .%or%) or $otin! re.%ire)ent stated in said articles of incorporation shall not
be $alid or e/ecti$e %nless appro$ed b" the a?r)ati$e $ote of at least two-thirds ((@*) of the o%tstandin!
capital stock# whether with or witho%t $otin! ri!hts# or of s%ch !reater proportion of shares as )a" be
specicall" pro$ided in the articles of incorporation for a)endin!# deletin! or re)o$in! an" of the
aforesaid pro$isions# at a )eetin! d%l" called for the p%rpose.
Section 1&!. 'eadlocks. - Eotwithstandin! an" contrar" pro$ision in the articles of incorporation or b"-
laws or a!ree)ent of stockholders of a close corporation# if the directors or stockholders are so di$ided
respectin! the )ana!e)ent of the corporation;s b%siness and a/airs that the $otes re.%ired for an"
corporate action cannot be obtained# with the conse.%ence that the b%siness and a/airs of the corporation
can no lon!er be cond%cted to the ad$anta!e of the stockholders !enerall"# the Sec%rities and 0&chan!e
Co))ission# %pon written petition b" an" stockholder# shall ha$e the power to arbitrate the disp%te. +n the
e&ercise of s%ch power# the Co))ission shall ha$e a%thorit" to )ake s%ch order as it dee)s appropriate#
incl%din! an order- (1) cancellin! or alterin! an" pro$ision contained in the articles of incorporation# b"-
laws# or an" stockholder;s a!ree)ent1 (() cancellin!# alterin! or en<oinin! an" resol%tion or act of the
corporation or its board of directors# stockholders# or o?cers1 (*) directin! or prohibitin! an" act of the
corporation or its board of directors# stockholders# o?cers# or other persons part" to the action1 (,)
re.%irin! the p%rchase at their fair $al%e of shares of an" stockholder# either b" the corporation re!ardless
of the a$ailabilit" of %nrestricted retained earnin!s in its books# or b" the other stockholders1 (2)
appointin! a pro$isional director1 (5) dissol$in! the corporation1 or (7) !rantin! s%ch other relief as the
circ%)stances )a" warrant.
A pro$isional director shall be an i)partial person who is neither a stockholder nor a creditor of the
corporation or of an" s%bsidiar" or a?liate of the corporation# and whose f%rther .%alications# if an"# )a"
be deter)ined b" the Co))ission. A pro$isional director is not a recei$er of the corporation and does not
ha$e the title and powers of a c%stodian or recei$er. A pro$isional director shall ha$e all the ri!hts and
powers of a d%l" elected director of the corporation# incl%din! the ri!ht to notice of and to $ote at )eetin!s
of directors# %ntil s%ch ti)e as he shall be re)o$ed b" order of the Co))ission or b" all the stockholders.
Jis co)pensation shall be deter)ined b" a!ree)ent between hi) and the corporation s%b<ect to appro$al
of the Co))ission# which )a" & his co)pensation in the absence of a!ree)ent or in the e$ent of
disa!ree)ent between the pro$isional director and the corporation.
Section 1&". 4ithdrawal of stockholder or dissolution of corporation. - +n addition and witho%t pre<%dice
to other ri!hts and re)edies a$ailable to a stockholder %nder this Title# an" stockholder of a close
corporation )a"# for an" reason# co)pel the said corporation to p%rchase his shares at their fair $al%e#
which shall not be less than their par or iss%ed $al%e# when the corporation has s%?cient assets in its
books to co$er its debts and liabilities e&cl%si$e of capital stock- Pro$ided# That an" stockholder of a close
corporation )a"# b" written petition to the Sec%rities and 0&chan!e Co))ission# co)pel the dissol%tion of
s%ch corporation whene$er an" of acts of the directors# o?cers or those in control of the corporation is
ille!al# or fra%d%lent# or dishonest# or oppressi$e or %nfairl" pre<%dicial to the corporation or an"
stockholder# or whene$er corporate assets are bein! )isapplied or wasted.
TITLE ,III - SPECIAL CORPORATIONS
CHAPTER I
ED(CATIONAL CORPORATIONS
Section 1&6. "ncorporation. - 0d%cational corporations shall be !o$erned b" special laws and b" the
!eneral pro$isions of this Code. (n)
GSV-(5
Section 1&#. /re*requisites to incorporation. - 0&cept %pon fa$orable reco))endation of the 6inistr" of
0d%cation and C%lt%re# the Sec%rities and 0&chan!e Co))ission shall not accept or appro$e the articles of
incorporation and b"-laws of an" ed%cational instit%tion. (158a)
Section 1&8. 5oard of trustees. - Tr%stees of ed%cational instit%tions or!ani'ed as non-stock corporations
shall not be less than $e (2) nor )ore than fteen (12)- Pro$ided# howe$er# That the n%)ber of tr%stees
shall be in )%ltiples of $e (2).
Bnless otherwise pro$ided in the articles of incorporation on the b"-laws# the board of tr%stees of
incorporated schools# colle!es# or other instit%tions of learnin! shall# as soon as or!ani'ed# so classif"
the)sel$es that the ter) of o?ce of one-fth (1@2) of their n%)ber shall e&pire e$er" "ear. Tr%stees
thereafter elected to ll $acancies# occ%rrin! before the e&piration of a partic%lar ter)# shall hold o?ce
onl" for the %ne&pired period. Tr%stees elected thereafter to ll $acancies ca%sed b" e&piration of ter)
shall hold o?ce for $e (2) "ears. A )a<orit" of the tr%stees shall constit%te a .%or%) for the transaction of
b%siness. The powers and a%thorit" of tr%stees shall be dened in the b"-laws.
:or instit%tions or!ani'ed as stock corporations# the n%)ber and ter) of directors shall be !o$erned b" the
pro$isions on stock corporations. (15Aa)
CHAPTER II
RELIGIO(S CORPORATIONS
Section 1&$. Classes of reli.ious corporations. - =eli!io%s corporations )a" be incorporated b" one or
)ore persons. S%ch corporations )a" be classied into corporations sole and reli!io%s societies.
=eli!io%s corporations shall be !o$erned b" this Chapter and b" the !eneral pro$isions on non-stock
corporations insofar as the" )a" be applicable. (n)
Section 11&. Corporation sole. - :or the p%rpose of ad)inisterin! and )ana!in!# as tr%stee# the a/airs#
propert" and te)poralities of an" reli!io%s deno)ination# sect or ch%rch# a corporation sole )a" be
for)ed b" the chief archbishop# bishop# priest# )inister# rabbi or other presidin! elder of s%ch reli!io%s
deno)ination# sect or ch%rch. (12,a)
Section 111. !rticles of incorporation. - +n order to beco)e a corporation sole# the chief archbishop#
bishop# priest# )inister# rabbi or presidin! elder of an" reli!io%s deno)ination# sect or ch%rch )%st le with
the Sec%rities and 0&chan!e Co))ission articles of incorporation settin! forth the followin!-
1. That he is the chief archbishop# bishop# priest# )inister# rabbi or presidin! elder of his reli!io%s
deno)ination# sect or ch%rch and that he desires to beco)e a corporation sole1
(. That the r%les# re!%lations and discipline of his reli!io%s deno)ination# sect or ch%rch are not
inconsistent with his beco)in! a corporation sole and do not forbid it1
*. That as s%ch chief archbishop# bishop# priest# )inister# rabbi or presidin! elder# he is char!ed
with the ad)inistration of the te)poralities and the )ana!e)ent of the a/airs# estate and
properties of his reli!io%s deno)ination# sect or ch%rch within his territorial <%risdiction# describin!
s%ch territorial <%risdiction1
,. The )anner in which an" $acanc" occ%rrin! in the o?ce of chief archbishop# bishop# priest#
)inister# rabbi of presidin! elder is re.%ired to be lled# accordin! to the r%les# re!%lations or
discipline of the reli!io%s deno)ination# sect or ch%rch to which he belon!s1 and
2. The place where the principal o?ce of the corporation sole is to be established and located#
which place )%st be within the Philippines.
The articles of incorporation )a" incl%de an" other pro$ision not contrar" to law for the re!%lation of the
a/airs of the corporation. (n)
Section 112. 1ubmission of the articles of incorporation. - The articles of incorporation )%st be $eried#
before lin!# b" a?da$it or a?r)ation of the chief archbishop# bishop# priest# )inister# rabbi or presidin!
elder# as the case )a" be# and acco)panied b" a cop" of the co))ission# certicate of election or letter
of appoint)ent of s%ch chief archbishop# bishop# priest# )inister# rabbi or presidin! elder# d%l" certied to
be correct b" an" notar" p%blic.
:ro) and after the lin! with the Sec%rities and 0&chan!e Co))ission of the said articles of incorporation#
$eried b" a?da$it or a?r)ation# and acco)panied b" the doc%)ents )entioned in the precedin!
para!raph# s%ch chief archbishop# bishop# priest# )inister# rabbi or presidin! elder shall beco)e a
GSV-(7
corporation sole and all te)poralities# estate and properties of the reli!io%s deno)ination# sect or ch%rch
theretofore ad)inistered or )ana!ed b" hi) as s%ch chief archbishop# bishop# priest# )inister# rabbi or
presidin! elder shall be held in tr%st b" hi) as a corporation sole# for the %se# p%rpose# behalf and sole
benet of his reli!io%s deno)ination# sect or ch%rch# incl%din! hospitals# schools# colle!es# orphan
as"l%)s# parsona!es and ce)eteries thereof. (n)
Section 11. !cquisition and alienation of property. - An" corporation sole )a" p%rchase and hold real
estate and personal propert" for its ch%rch# charitable# bene$olent or ed%cational p%rposes# and )a"
recei$e be.%ests or !ifts for s%ch p%rposes. S%ch corporation )a" sell or )ort!a!e real propert" held b" it
b" obtainin! an order for that p%rpose fro) the Co%rt of :irst +nstance of the pro$ince where the propert"
is sit%ated %pon proof )ade to the satisfaction of the co%rt that notice of the application for lea$e to sell or
)ort!a!e has been !i$en b" p%blication or otherwise in s%ch )anner and for s%ch ti)e as said co%rt )a"
ha$e directed# and that it is to the interest of the corporation that lea$e to sell or )ort!a!e sho%ld be
!ranted. The application for lea$e to sell or )ort!a!e )%st be )ade b" petition# d%l" $eried# b" the chief
archbishop# bishop# priest# )inister# rabbi or presidin! elder actin! as corporation sole# and )a" be
opposed b" an" )e)ber of the reli!io%s deno)ination# sect or ch%rch represented b" the corporation sole-
Pro$ided# That in cases where the r%les# re!%lations and discipline of the reli!io%s deno)ination# sect or
ch%rch# reli!io%s societ" or order concerned represented b" s%ch corporation sole re!%late the )ethod of
ac.%irin!# holdin!# sellin! and )ort!a!in! real estate and personal propert"# s%ch r%les# re!%lations and
discipline shall control# and the inter$ention of the co%rts shall not be necessar". (12Aa)
Section 11!. Fillin. of %acancies. - The s%ccessors in o?ce of an" chief archbishop# bishop# priest#
)inister# rabbi or presidin! elder in a corporation sole shall beco)e the corporation sole on their accession
to o?ce and shall be per)itted to transact b%siness as s%ch on the lin! with the Sec%rities and 0&chan!e
Co))ission of a cop" of their co))ission# certicate of election# or letters of appoint)ent# d%l" certied
b" an" notar" p%blic.
9%rin! an" $acanc" in the o?ce of chief archbishop# bishop# priest# )inister# rabbi or presidin! elder of
an" reli!io%s deno)ination# sect or ch%rch incorporated as a corporation sole# the person or persons
a%thori'ed and e)powered b" the r%les# re!%lations or discipline of the reli!io%s deno)ination# sect or
ch%rch represented b" the corporation sole to ad)inister the te)poralities and )ana!e the a/airs# estate
and properties of the corporation sole d%rin! the $acanc" shall e&ercise all the powers and a%thorit" of the
corporation sole d%rin! s%ch $acanc". (128a)
Section 11". 'issolution. - A corporation sole )a" be dissol$ed and its a/airs settled $ol%ntaril" b"
s%b)ittin! to the Sec%rities and 0&chan!e Co))ission a $eried declaration of dissol%tion.
The declaration of dissol%tion shall set forth-
1. The na)e of the corporation1
(. The reason for dissol%tion and windin! %p1
*. The a%thori'ation for the dissol%tion of the corporation b" the partic%lar reli!io%s deno)ination#
sect or ch%rch1
,. The na)es and addresses of the persons who are to s%per$ise the windin! %p of the a/airs of the
corporation.
Bpon appro$al of s%ch declaration of dissol%tion b" the Sec%rities and 0&chan!e Co))ission# the
corporation shall cease to carr" on its operations e&cept for the p%rpose of windin! %p its a/airs. (n)
Section 116. Reli.ious societies. - An" reli!io%s societ" or reli!io%s order# or an" diocese# s"nod# or
district or!ani'ation of an" reli!io%s deno)ination# sect or ch%rch# %nless forbidden b" the constit%tion#
r%les# re!%lations# or discipline of the reli!io%s deno)ination# sect or ch%rch of which it is a part# or b"
co)petent a%thorit"# )a"# %pon written consent and@or b" an a?r)ati$e $ote at a )eetin! called for the
p%rpose of at least two-thirds ((@*) of its )e)bership# incorporate for the ad)inistration of its
te)poralities or for the )ana!e)ent of its a/airs# properties and estate b" lin! with the Sec%rities and
0&chan!e Co))ission# articles of incorporation $eried b" the a?da$it of the presidin! elder# secretar"# or
clerk or other )e)ber of s%ch reli!io%s societ" or reli!io%s order# or diocese# s"nod# or district or!ani'ation
of the reli!io%s deno)ination# sect or ch%rch# settin! forth the followin!-
1. That the reli!io%s societ" or reli!io%s order# or diocese# s"nod# or district or!ani'ation is a
reli!io%s or!ani'ation of a reli!io%s deno)ination# sect or ch%rch1
(. That at least two-thirds ((@*) of its )e)bership ha$e !i$en their written consent or ha$e $oted to
incorporate# at a d%l" con$ened )eetin! of the bod"1
GSV-(8
*. That the incorporation of the reli!io%s societ" or reli!io%s order# or diocese# s"nod# or district
or!ani'ation desirin! to incorporate is not forbidden b" co)petent a%thorit" or b" the constit%tion#
r%les# re!%lations or discipline of the reli!io%s deno)ination# sect# or ch%rch of which it for)s a
part1
,. That the reli!io%s societ" or reli!io%s order# or diocese# s"nod# or district or!ani'ation desires to
incorporate for the ad)inistration of its a/airs# properties and estate1
2. The place where the principal o?ce of the corporation is to be established and located# which
place )%st be within the Philippines1 and
1. The na)es# nationalities# and residences of the tr%stees elected b" the reli!io%s societ" or
reli!io%s order# or the diocese# s"nod# or district or!ani'ation to ser$e for the rst "ear or
s%ch other period as )a" be prescribed b" the laws of the reli!io%s societ" or reli!io%s
order# or of the diocese# s"nod# or district or!ani'ation# the board of tr%stees to be not less
than $e (2) nor )ore than fteen (12). (153a)
TITLE ,IV - DISSOL(TION
Section 11#. 6ethods of dissol%tion. - A corporation for)ed or or!ani'ed %nder the pro$isions of this
Code )a" be dissol$ed $ol%ntaril" or in$ol%ntaril". (n)
Section 118. Vol%ntar" dissol%tion where no creditors are a/ected. - +f dissol%tion of a corporation does
not pre<%dice the ri!hts of an" creditor ha$in! a clai) a!ainst it# the dissol%tion )a" be e/ected b"
)a<orit" $ote of the board of directors or tr%stees# and b" a resol%tion d%l" adopted b" the a?r)ati$e $ote
of the stockholders ownin! at least two-thirds ((@*) of the o%tstandin! capital stock or of at least two-thirds
((@*) of the )e)bers of a )eetin! to be held %pon call of the directors or tr%stees after p%blication of the
notice of ti)e# place and ob<ect of the )eetin! for three (*) consec%ti$e weeks in a newspaper p%blished
in the place where the principal o?ce of said corporation is located1 and if no newspaper is p%blished in
s%ch place# then in a newspaper of !eneral circ%lation in the Philippines# after sendin! s%ch notice to each
stockholder or )e)ber either b" re!istered )ail or b" personal deli$er" at least thirt" (*3) da"s prior to
said )eetin!. A cop" of the resol%tion a%thori'in! the dissol%tion shall be certied b" a )a<orit" of the
board of directors or tr%stees and co%ntersi!ned b" the secretar" of the corporation. The Sec%rities and
0&chan!e Co))ission shall there%pon iss%e the certicate of dissol%tion. (5(a)
Section 11$. Vol%ntar" dissol%tion where creditors are a/ected. - 4here the dissol%tion of a corporation
)a" pre<%dice the ri!hts of an" creditor# the petition for dissol%tion shall be led with the Sec%rities and
0&chan!e Co))ission. The petition shall be si!ned b" a )a<orit" of its board of directors or tr%stees or
other o?cers ha$in! the )ana!e)ent of its a/airs# $eried b" its president or secretar" or one of its
directors or tr%stees# and shall set forth all clai)s and de)ands a!ainst it# and that its dissol%tion was
resol$ed %pon b" the a?r)ati$e $ote of the stockholders representin! at least two-thirds ((@*) of the
o%tstandin! capital stock or b" at least two-thirds ((@*) of the )e)bers at a )eetin! of its stockholders or
)e)bers called for that p%rpose.
+f the petition is s%?cient in for) and s%bstance# the Co))ission shall# b" an order recitin! the p%rpose of
the petition# & a date on or before which ob<ections thereto )a" be led b" an" person# which date shall
not be less than thirt" (*3) da"s nor )ore than si&t" (53) da"s after the entr" of the order. Hefore s%ch
date# a cop" of the order shall be p%blished at least once a week for three (*) consec%ti$e weeks in a
newspaper of !eneral circ%lation p%blished in the )%nicipalit" or cit" where the principal o?ce of the
corporation is sit%ated# or if there be no s%ch newspaper# then in a newspaper of !eneral circ%lation in the
Philippines# and a si)ilar cop" shall be posted for three (*) consec%ti$e weeks in three (*) p%blic places in
s%ch )%nicipalit" or cit".
Bpon $e (2) da";s notice# !i$en after the date on which the ri!ht to le ob<ections as &ed in the order has
e&pired# the Co))ission shall proceed to hear the petition and tr" an" iss%e )ade b" the ob<ections led1
and if no s%ch ob<ection is s%?cient# and the )aterial alle!ations of the petition are tr%e# it shall render
<%d!)ent dissol$in! the corporation and directin! s%ch disposition of its assets as <%stice re.%ires# and
)a" appoint a recei$er to collect s%ch assets and pa" the debts of the corporation. (=%le 13,# =Ca)
Section 12&. 'issolution by shortenin. corporate term. - A $ol%ntar" dissol%tion )a" be e/ected b"
a)endin! the articles of incorporation to shorten the corporate ter) p%rs%ant to the pro$isions of this
Code. A cop" of the a)ended articles of incorporation shall be s%b)itted to the Sec%rities and 0&chan!e
Co))ission in accordance with this Code. Bpon appro$al of the a)ended articles of incorporation of the
e&piration of the shortened ter)# as the case )a" be# the corporation shall be dee)ed dissol$ed witho%t
an" f%rther proceedin!s# s%b<ect to the pro$isions of this Code on li.%idation. (n)
GSV-(A
Section 121. "n%oluntary dissolution. - A corporation )a" be dissol$ed b" the Sec%rities and 0&chan!e
Co))ission %pon lin! of a $eried co)plaint and after proper notice and hearin! on the !ro%nds
pro$ided b" e&istin! laws# r%les and re!%lations. (n)
Section 122. Corporate liquidation. - 0$er" corporation whose charter e&pires b" its own li)itation or is
ann%lled b" forfeit%re or otherwise# or whose corporate e&istence for other p%rposes is ter)inated in an"
other )anner# shall ne$ertheless be contin%ed as a bod" corporate for three (*) "ears after the ti)e when
it wo%ld ha$e been so dissol$ed# for the p%rpose of prosec%tin! and defendin! s%its b" or a!ainst it and
enablin! it to settle and close its a/airs# to dispose of and con$e" its propert" and to distrib%te its assets#
b%t not for the p%rpose of contin%in! the b%siness for which it was established.
At an" ti)e d%rin! said three (*) "ears# the corporation is a%thori'ed and e)powered to con$e" all of its
propert" to tr%stees for the benet of stockholders# )e)bers# creditors# and other persons in interest.
:ro) and after an" s%ch con$e"ance b" the corporation of its propert" in tr%st for the benet of its
stockholders# )e)bers# creditors and others in interest# all interest which the corporation had in the
propert" ter)inates# the le!al interest $ests in the tr%stees# and the benecial interest in the stockholders#
)e)bers# creditors or other persons in interest.
Bpon the windin! %p of the corporate a/airs# an" asset distrib%table to an" creditor or stockholder or
)e)ber who is %nknown or cannot be fo%nd shall be escheated to the cit" or )%nicipalit" where s%ch
assets are located.
0&cept b" decrease of capital stock and as otherwise allowed b" this Code# no corporation shall distrib%te
an" of its assets or propert" e&cept %pon lawf%l dissol%tion and after pa")ent of all its debts and liabilities.
(77a# 8Aa# 15a)
TITLE ,V - FOREIGN CORPORATIONS
Section 12. 'efnition and ri.hts of forei.n corporations. - :or the p%rposes of this Code# a forei!n
corporation is one for)ed# or!ani'ed or e&istin! %nder an" laws other than those of the Philippines and
whose laws allow :ilipino citi'ens and corporations to do b%siness in its own co%ntr" or state. +t shall ha$e
the ri!ht to transact b%siness in the Philippines after it shall ha$e obtained a license to transact b%siness in
this co%ntr" in accordance with this Code and a certicate of a%thorit" fro) the appropriate !o$ern)ent
a!enc". (n)
Section 12!. !pplication to e&istin. forei.n corporations. - 0$er" forei!n corporation which on the date of
the e/ecti$it" of this Code is a%thori'ed to do b%siness in the Philippines %nder a license therefore iss%ed
to it# shall contin%e to ha$e s%ch a%thorit" %nder the ter)s and condition of its license# s%b<ect to the
pro$isions of this Code and other special laws. (n)
Section 12". !pplication for a license. - A forei!n corporation appl"in! for a license to transact b%siness in
the Philippines shall s%b)it to the Sec%rities and 0&chan!e Co))ission a cop" of its articles of
incorporation and b"-laws# certied in accordance with law# and their translation to an o?cial lan!%a!e of
the Philippines# if necessar". The application shall be %nder oath and# %nless alread" stated in its articles of
incorporation# shall specicall" set forth the followin!-
1. The date and ter) of incorporation1
(. The address# incl%din! the street n%)ber# of the principal o?ce of the corporation in the co%ntr"
or state of incorporation1
*. The na)e and address of its resident a!ent a%thori'ed to accept s%))ons and process in all
le!al proceedin!s and# pendin! the establish)ent of a local o?ce# all notices a/ectin! the
corporation1
,. The place in the Philippines where the corporation intends to operate1
2. The specic p%rpose or p%rposes which the corporation intends to p%rs%e in the transaction of its
b%siness in the Philippines- Pro$ided# That said p%rpose or p%rposes are those specicall" stated in
the certicate of a%thorit" iss%ed b" the appropriate !o$ern)ent a!enc"1
5. The na)es and addresses of the present directors and o?cers of the corporation1
7. A state)ent of its a%thori'ed capital stock and the a!!re!ate n%)ber of shares which the
corporation has a%thorit" to iss%e# ite)i'ed b" classes# par $al%e of shares# shares witho%t par
$al%e# and series# if an"1
GSV-*3
8. A state)ent of its o%tstandin! capital stock and the a!!re!ate n%)ber of shares which the
corporation has iss%ed# ite)i'ed b" classes# par $al%e of shares# shares witho%t par $al%e# and
series# if an"1
A. A state)ent of the a)o%nt act%all" paid in1 and
13. S%ch additional infor)ation as )a" be necessar" or appropriate in order to enable the
Sec%rities and 0&chan!e Co))ission to deter)ine whether s%ch corporation is entitled to a license
to transact b%siness in the Philippines# and to deter)ine and assess the fees pa"able.
Attached to the application for license shall be a d%l" e&ec%ted certicate %nder oath b" the a%thori'ed
o?cial or o?cials of the <%risdiction of its incorporation# attestin! to the fact that the laws of the co%ntr" or
state of the applicant allow :ilipino citi'ens and corporations to do b%siness therein# and that the applicant
is an e&istin! corporation in !ood standin!. +f s%ch certicate is in a forei!n lan!%a!e# a translation thereof
in 0n!lish %nder oath of the translator shall be attached thereto.
The application for a license to transact b%siness in the Philippines shall likewise be acco)panied b" a
state)ent %nder oath of the president or an" other person a%thori'ed b" the corporation# showin! to the
satisfaction of the Sec%rities and 0&chan!e Co))ission and other !o$ern)ental a!enc" in the proper
cases that the applicant is sol$ent and in so%nd nancial condition# and settin! forth the assets and
liabilities of the corporation as of the date not e&ceedin! one (1) "ear i))ediatel" prior to the lin! of the
application.
:orei!n bankin!# nancial and ins%rance corporations shall# in addition to the abo$e re.%ire)ents# co)pl"
with the pro$isions of e&istin! laws applicable to the). +n the case of all other forei!n corporations# no
application for license to transact b%siness in the Philippines shall be accepted b" the Sec%rities and
0&chan!e Co))ission witho%t pre$io%s a%thorit" fro) the appropriate !o$ern)ent a!enc"# whene$er
re.%ired b" law. (58a)
Section 126. "ssuance of a license. - +f the Sec%rities and 0&chan!e Co))ission is satised that the
applicant has co)plied with all the re.%ire)ents of this Code and other special laws# r%les and re!%lations#
the Co))ission shall iss%e a license to the applicant to transact b%siness in the Philippines for the p%rpose
or p%rposes specied in s%ch license. Bpon iss%ance of the license# s%ch forei!n corporation )a"
co))ence to transact b%siness in the Philippines and contin%e to do so for as lon! as it retains its
a%thorit" to act as a corporation %nder the laws of the co%ntr" or state of its incorporation# %nless s%ch
license is sooner s%rrendered# re$oked# s%spended or ann%lled in accordance with this Code or other
special laws.
4ithin si&t" (53) da"s after the iss%ance of the license to transact b%siness in the Philippines# the license#
e&cept forei!n bankin! or ins%rance corporation# shall deposit with the Sec%rities and 0&chan!e
Co))ission for the benet of present and f%t%re creditors of the licensee in the Philippines# sec%rities
satisfactor" to the Sec%rities and 0&chan!e Co))ission# consistin! of bonds or other e$idence of
indebtedness of the Go$ern)ent of the Philippines# its political s%bdi$isions and instr%)entalities# or of
!o$ern)ent-owned or controlled corporations and entities# shares of stock in "re!istered enterprises" as
this ter) is dened in =ep%blic Act Eo. 2185# shares of stock in do)estic corporations re!istered in the
stock e&chan!e# or shares of stock in do)estic ins%rance co)panies and banks# or an" co)bination of
these kinds of sec%rities# with an act%al )arket $al%e of at least one h%ndred tho%sand (P133#333.) pesos1
Pro$ided# howe$er# That within si& (5) )onths after each scal "ear of the licensee# the Sec%rities and
0&chan!e Co))ission shall re.%ire the licensee to deposit additional sec%rities e.%i$alent in act%al
)arket $al%e to two ((>) percent of the a)o%nt b" which the licensee;s !ross inco)e for that scal "ear
e&ceeds $e )illion (P2#333#333.33) pesos. The Sec%rities and 0&chan!e Co))ission shall also re.%ire
deposit of additional sec%rities if the act%al )arket $al%e of the sec%rities on deposit has decreased b" at
least ten (13>) percent of their act%al )arket $al%e at the ti)e the" were deposited. The Sec%rities and
0&chan!e Co))ission )a" at its discretion release part of the additional sec%rities deposited with it if the
!ross inco)e of the licensee has decreased# or if the act%al )arket $al%e of the total sec%rities on deposit
has increased# b" )ore than ten (13>) percent of the act%al )arket $al%e of the sec%rities at the ti)e
the" were deposited. The Sec%rities and 0&chan!e Co))ission )a"# fro) ti)e to ti)e# allow the licensee
to s%bstit%te other sec%rities for those alread" on deposit as lon! as the licensee is sol$ent. S%ch licensee
shall be entitled to collect the interest or di$idends on the sec%rities deposited. +n the e$ent the licensee
ceases to do b%siness in the Philippines# the sec%rities deposited as aforesaid shall be ret%rned# %pon the
licensee;s application therefor and %pon proof to the satisfaction of the Sec%rities and 0&chan!e
Co))ission that the licensee has no liabilit" to Philippine residents# incl%din! the Go$ern)ent of the
=ep%blic of the Philippines. (n)
Section 12#. 4ho may be a resident a.ent. - A resident a!ent )a" be either an indi$id%al residin! in the
Philippines or a do)estic corporation lawf%ll" transactin! b%siness in the Philippines- Pro$ided# That in the
case of an indi$id%al# he )%st be of !ood )oral character and of so%nd nancial standin!. (n)
GSV-*1
Section 128. Resident a.ent0 ser%ice of process. - The Sec%rities and 0&chan!e Co))ission shall re.%ire
as a condition precedent to the iss%ance of the license to transact b%siness in the Philippines b" an"
forei!n corporation that s%ch corporation le with the Sec%rities and 0&chan!e Co))ission a written
power of attorne" desi!natin! so)e person who )%st be a resident of the Philippines# on who) an"
s%))ons and other le!al processes )a" be ser$ed in all actions or other le!al proceedin!s a!ainst s%ch
corporation# and consentin! that ser$ice %pon s%ch resident a!ent shall be ad)itted and held as $alid as if
ser$ed %pon the d%l" a%thori'ed o?cers of the forei!n corporation at its ho)e o?ce. An" s%ch forei!n
corporation shall likewise e&ec%te and le with the Sec%rities and 0&chan!e Co))ission an a!ree)ent or
stip%lation# e&ec%ted b" the proper a%thorities of said corporation# in for) and s%bstance as follows-
"The (na)e of forei!n corporation) does hereb" stip%late and a!ree# in consideration of its bein! !ranted
b" the Sec%rities and 0&chan!e Co))ission a license to transact b%siness in the Philippines# that if at an"
ti)e said corporation shall cease to transact b%siness in the Philippines# or shall be witho%t an" resident
a!ent in the Philippines on who) an" s%))ons or other le!al processes )a" be ser$ed# then in an" action
or proceedin! arisin! o%t of an" b%siness or transaction which occ%rred in the Philippines# ser$ice of an"
s%))ons or other le!al process )a" be )ade %pon the Sec%rities and 0&chan!e Co))ission and that
s%ch ser$ice shall ha$e the sa)e force and e/ect as if )ade %pon the d%l"-a%thori'ed o?cers of the
corporation at its ho)e o?ce."
4hene$er s%ch ser$ice of s%))ons or other process shall be )ade %pon the Sec%rities and 0&chan!e
Co))ission# the Co))ission shall# within ten (13) da"s thereafter# trans)it b" )ail a cop" of s%ch
s%))ons or other le!al process to the corporation at its ho)e or principal o?ce. The sendin! of s%ch cop"
b" the Co))ission shall be necessar" part of and shall co)plete s%ch ser$ice. All e&penses inc%rred b"
the Co))ission for s%ch ser$ice shall be paid in ad$ance b" the part" at whose instance the ser$ice is
)ade.
+n case of a chan!e of address of the resident a!ent# it shall be his or its d%t" to i))ediatel" notif" in
writin! the Sec%rities and 0&chan!e Co))ission of the new address. (7(a1 and n)
Section 12$. -aw applicable. - An" forei!n corporation lawf%ll" doin! b%siness in the Philippines shall be
bo%nd b" all laws# r%les and re!%lations applicable to do)estic corporations of the sa)e class# e&cept s%ch
onl" as pro$ide for the creation# for)ation# or!ani'ation or dissol%tion of corporations or those which &
the relations# liabilities# responsibilities# or d%ties of stockholders# )e)bers# or o?cers of corporations to
each other or to the corporation. (7*a)
Section 1&. !mendments to articles of incorporation or by*laws of forei.n corporations. - 4hene$er the
articles of incorporation or b"-laws of a forei!n corporation a%thori'ed to transact b%siness in the
Philippines are a)ended# s%ch forei!n corporation shall# within si&t" (53) da"s after the a)end)ent
beco)es e/ecti$e# le with the Sec%rities and 0&chan!e Co))ission# and in the proper cases with the
appropriate !o$ern)ent a!enc"# a d%l" a%thenticated cop" of the articles of incorporation or b"-laws# as
a)ended# indicatin! clearl" in capital letters or b" %nderscorin! the chan!e or chan!es )ade# d%l"
certied b" the a%thori'ed o?cial or o?cials of the co%ntr" or state of incorporation. The lin! thereof
shall not of itself enlar!e or alter the p%rpose or p%rposes for which s%ch corporation is a%thori'ed to
transact b%siness in the Philippines. (n)
Section 11. !mended license. - A forei!n corporation a%thori'ed to transact b%siness in the Philippines
shall obtain an a)ended license in the e$ent it chan!es its corporate na)e# or desires to p%rs%e in the
Philippines other or additional p%rposes# b" s%b)ittin! an application therefor to the Sec%rities and
0&chan!e Co))ission# fa$orabl" endorsed b" the appropriate !o$ern)ent a!enc" in the proper cases. (n)
Section 12. er.er or consolidation in%ol%in. a forei.n corporation licensed in the /hilippines. - Dne or
)ore forei!n corporations a%thori'ed to transact b%siness in the Philippines )a" )er!e or consolidate with
an" do)estic corporation or corporations if s%ch is per)itted %nder Philippine laws and b" the law of its
incorporation- Pro$ided# That the re.%ire)ents on )er!er or consolidation as pro$ided in this Code are
followed.
4hene$er a forei!n corporation a%thori'ed to transact b%siness in the Philippines shall be a part" to a
)er!er or consolidation in its ho)e co%ntr" or state as per)itted b" the law of its incorporation# s%ch
forei!n corporation shall# within si&t" (53) da"s after s%ch )er!er or consolidation beco)es e/ecti$e# le
with the Sec%rities and 0&chan!e Co))ission# and in proper cases with the appropriate !o$ern)ent
a!enc"# a cop" of the articles of )er!er or consolidation d%l" a%thenticated b" the proper o?cial or
o?cials of the co%ntr" or state %nder the laws of which )er!er or consolidation was e/ected- Pro$ided#
howe$er# That if the absorbed corporation is the forei!n corporation doin! b%siness in the Philippines# the
latter shall at the sa)e ti)e le a petition for withdrawal of its license in accordance with this Title. (n)
Section 1. 'oin. business without a license. - Eo forei!n corporation transactin! b%siness in the
Philippines witho%t a license# or its s%ccessors or assi!ns# shall be per)itted to )aintain or inter$ene in
an" action# s%it or proceedin! in an" co%rt or ad)inistrati$e a!enc" of the Philippines1 b%t s%ch
GSV-*(
corporation )a" be s%ed or proceeded a!ainst before Philippine co%rts or ad)inistrati$e trib%nals on an"
$alid ca%se of action reco!ni'ed %nder Philippine laws. (5Aa)
Section 1!. Re%ocation of license. - 4itho%t pre<%dice to other !ro%nds pro$ided b" special laws# the
license of a forei!n corporation to transact b%siness in the Philippines )a" be re$oked or s%spended b" the
Sec%rities and 0&chan!e Co))ission %pon an" of the followin! !ro%nds-
1. :ail%re to le its ann%al report or pa" an" fees as re.%ired b" this Code1
(. :ail%re to appoint and )aintain a resident a!ent in the Philippines as re.%ired b" this Title1
*. :ail%re# after chan!e of its resident a!ent or of his address# to s%b)it to the Sec%rities and
0&chan!e Co))ission a state)ent of s%ch chan!e as re.%ired b" this Title1
,. :ail%re to s%b)it to the Sec%rities and 0&chan!e Co))ission an a%thenticated cop" of an"
a)end)ent to its articles of incorporation or b"-laws or of an" articles of )er!er or consolidation
within the ti)e prescribed b" this Title1
2. A )isrepresentation of an" )aterial )atter in an" application# report# a?da$it or other doc%)ent
s%b)itted b" s%ch corporation p%rs%ant to this Title1
5. :ail%re to pa" an" and all ta&es# i)posts# assess)ents or penalties# if an"# lawf%ll" d%e to the
Philippine Go$ern)ent or an" of its a!encies or political s%bdi$isions1
7. Transactin! b%siness in the Philippines o%tside of the p%rpose or p%rposes for which s%ch
corporation is a%thori'ed %nder its license1
8. Transactin! b%siness in the Philippines as a!ent of or actin! for and in behalf of an" forei!n
corporation or entit" not d%l" licensed to do b%siness in the Philippines1 or
A. An" other !ro%nd as wo%ld render it %nt to transact b%siness in the Philippines. (n)
Section 1". "ssuance of certifcate of re%ocation. - Bpon the re$ocation of an" s%ch license to transact
b%siness in the Philippines# the Sec%rities and 0&chan!e Co))ission shall iss%e a correspondin! certicate
of re$ocation# f%rnishin! a cop" thereof to the appropriate !o$ern)ent a!enc" in the proper cases.
The Sec%rities and 0&chan!e Co))ission shall also )ail to the corporation at its re!istered o?ce in the
Philippines a notice of s%ch re$ocation acco)panied b" a cop" of the certicate of re$ocation. (n)
Section 16. 4ithdrawal of forei.n corporations. - S%b<ect to e&istin! laws and re!%lations# a forei!n
corporation licensed to transact b%siness in the Philippines )a" be allowed to withdraw fro) the
Philippines b" lin! a petition for withdrawal of license. Eo certicate of withdrawal shall be iss%ed b" the
Sec%rities and 0&chan!e Co))ission %nless all the followin! re.%ire)ents are )et1
1. All clai)s which ha$e accr%ed in the Philippines ha$e been paid# co)pro)ised or settled1
(. All ta&es# i)posts# assess)ents# and penalties# if an"# lawf%ll" d%e to the Philippine Go$ern)ent
or an" of its a!encies or political s%bdi$isions ha$e been paid1 and
*. The petition for withdrawal of license has been p%blished once a week for three (*) consec%ti$e
weeks in a newspaper of !eneral circ%lation in the Philippines.
TITLE ,VI - MISCELLANEO(S PROVISIONS
Section 1#. 7utstandin. capital stock defned. - The ter) "o%tstandin! capital stock"# as %sed in this
Code# )eans the total shares of stock iss%ed %nder bindin! s%bscription a!ree)ents to s%bscribers or
stockholders# whether or not f%ll" or partiall" paid# e&cept treas%r" shares. (n)
Section 18. 'esi.nation of .o%ernin. boards. - The pro$isions of specic pro$isions of this Code to the
contrar" notwithstandin!# non-stock or special corporations )a"# thro%!h their articles of incorporation or
their b"-laws# desi!nate their !o$ernin! boards b" an" na)e other than as board of tr%stees. (n)
Section 1$. "ncorporation and other fees. - The Sec%rities and 0&chan!e Co))ission is hereb"
a%thori'ed to collect and recei$e fees as a%thori'ed b" law or b" r%les and re!%lations pro)%l!ated b" the
Co))ission. (n)
GSV-**
Section 1!&. 1tock ownership in certain corporations. - P%rs%ant to the d%ties specied b" Article K+V of
the Constit%tion# the Eational 0cono)ic and 9e$elop)ent A%thorit" shall# fro) ti)e to ti)e# )ake a
deter)ination of whether the corporate $ehicle has been %sed b" an" corporation or b" b%siness or
ind%str" to fr%strate the pro$isions thereof or of applicable laws# and shall s%b)it to the Hatasan!
Pa)bansa# whene$er dee)ed necessar"# a report of its ndin!s# incl%din! reco))endations for their
pre$ention or correction.
6a&i)%) li)its )a" be set b" the Hatasan! Pa)bansa for stockholdin!s in corporations declared b" it to
be $ested with a p%blic interest p%rs%ant to the pro$isions of this section# belon!in! to indi$id%als or
!ro%ps of indi$id%als related to each other b" consan!%init" or a?nit" or b" close b%siness interests# or
whene$er it is necessar" to achie$e national ob<ecti$es# pre$ent ille!al )onopolies or co)binations in
restraint or trade# or to i)ple)ent national econo)ic policies declared in laws# r%les and re!%lations
desi!ned to pro)ote the !eneral welfare and foster econo)ic de$elop)ent.
+n reco))endin! to the Hatasan! Pa)bansa corporations# b%sinesses or ind%stries to be declared $ested
with a p%blic interest and in for)%latin! proposals for li)itations on stock ownership# the Eational
0cono)ic and 9e$elop)ent A%thorit" shall consider the t"pe and nat%re of the ind%str"# the si'e of the
enterprise# the econo)ies of scale# the !eo!raphic location# the e&tent of :ilipino ownership# the labor
intensit" of the acti$it"# the e&port potential# as well as other factors which are !er)ane to the reali'ation
and pro)otion of b%siness and ind%str".
Section 1!1. !nnual report or corporations. - 0$er" corporation# do)estic or forei!n# lawf%ll" doin!
b%siness in the Philippines shall s%b)it to the Sec%rities and 0&chan!e Co))ission an ann%al report of its
operations# to!ether with a nancial state)ent of its assets and liabilities# certied b" an" independent
certied p%blic acco%ntant in appropriate cases# co$erin! the precedin! scal "ear and s%ch other
re.%ire)ents as the Sec%rities and 0&chan!e Co))ission )a" re.%ire. S%ch report shall be s%b)itted
within s%ch period as )a" be prescribed b" the Sec%rities and 0&chan!e Co))ission. (n)
Section 1!2. Confdential nature of e&amination results. - All interro!atories propo%nded b" the Sec%rities
and 0&chan!e Co))ission and the answers thereto# as well as the res%lts of an" e&a)ination )ade b" the
Co))ission or b" an" other o?cial a%thori'ed b" law to )ake an e&a)ination of the operations# books
and records of an" corporation# shall be kept strictl" condential# e&cept insofar as the law )a" re.%ire the
sa)e to be )ade p%blic or where s%ch interro!atories# answers or res%lts are necessar" to be presented as
e$idence before an" co%rt. (n)
Section 1!. Rule*makin. power of the 1ecurities and (&chan.e Commission. - The Sec%rities and
0&chan!e Co))ission shall ha$e the power and a%thorit" to i)ple)ent the pro$isions of this Code# and to
pro)%l!ate r%les and re!%lations reasonabl" necessar" to enable it to perfor) its d%ties here%nder#
partic%larl" in the pre$ention of fra%d and ab%ses on the part of the controllin! stockholders# )e)bers#
directors# tr%stees or o?cers. (n)
Section 1!!. ,iolations of the Code. - Violations of an" of the pro$isions of this Code or its a)end)ents
not otherwise specicall" penali'ed therein shall be p%nished b" a ne of not less than one tho%sand
(P1#333.33) pesos b%t not )ore than ten tho%sand (P13#333.33) pesos or b" i)prison)ent for not less
than thirt" (*3) da"s b%t not )ore than $e (2) "ears# or both# in the discretion of the co%rt. +f the $iolation
is co))itted b" a corporation# the sa)e )a"# after notice and hearin!# be dissol$ed in appropriate
proceedin!s before the Sec%rities and 0&chan!e Co))ission- Pro$ided# That s%ch dissol%tion shall not
precl%de the instit%tion of appropriate action a!ainst the director# tr%stee or o?cer of the corporation
responsible for said $iolation- Pro$ided# f%rther# That nothin! in this section shall be constr%ed to repeal
the other ca%ses for dissol%tion of a corporation pro$ided in this Code. (1A3 1@( a)
Section 1!". !mendment or repeal. - Eo ri!ht or re)ed" in fa$or of or a!ainst an" corporation# its
stockholders# )e)bers# directors# tr%stees# or o?cers# nor an" liabilit" inc%rred b" an" s%ch corporation#
stockholders# )e)bers# directors# tr%stees# or o?cers# shall be re)o$ed or i)paired either b" the
s%bse.%ent dissol%tion of said corporation or b" an" s%bse.%ent a)end)ent or repeal of this Code or of
an" part thereof. (n)
Section 1!6. Repealin. clause. - 0&cept as e&pressl" pro$ided b" this Code# all laws or parts thereof
inconsistent with an" pro$ision of this Code shall be dee)ed repealed. (n)
Section 1!#. 1eparability of pro%isions. - Sho%ld an" pro$ision of this Code or an" part thereof be
declared in$alid or %nconstit%tional# the other pro$isions# so far as the" are separable# shall re)ain in
force. (n)
Section 1!8. !pplicability to e&istin. corporations. - All corporations lawf%ll" e&istin! and doin! b%siness
in the Philippines on the date of the e/ecti$it" of this Code and heretofore a%thori'ed# licensed or
re!istered b" the Sec%rities and 0&chan!e Co))ission# shall be dee)ed to ha$e been a%thori'ed# licensed
or re!istered %nder the pro$isions of this Code# s%b<ect to the ter)s and conditions of its license# and shall
be !o$erned b" the pro$isions hereof- Pro$ided# That if an" s%ch corporation is a/ected b" the new
GSV-*,
re.%ire)ents of this Code# said corporation shall# %nless otherwise herein pro$ided# be !i$en a period of
not )ore than two (() "ears fro) the e/ecti$it" of this Code within which to co)pl" with the sa)e. (n)
Section 1!$. ()ecti%ity. - This Code shall take e/ect i))ediatel" %pon its appro$al.
Appro$ed# 6a" 1# 1A83
REP(BLIC ACT NO. 8#$$
THE SEC(RITIES REG(LATION CODE
5e it enacted by the 1enate and the 6ouse of Representati%e of the /hilippines in the Con.ress
assembled8
CHAPTER I
TITLE AND DEFINITIONS
Section 1. Title. - This shall be known as "The Sec%rities =e!%lation Code"
Section 2. 'eclaration of 1tate /olicy. M The State shall establish a sociall" conscio%s# free )arket that
re!%lates itself# enco%ra!e the widest participation of ownership in enterprises# enhance the
de)ocrati'ation of wealth# pro)ote the de$elop)ent of the capital )arket# protect in$estors# ens%re f%ll
and fair disclos%re abo%t sec%rities# )ini)i'e if not totall" eli)inate insider tradin! and other fra%d%lent or
)anip%lati$e de$ices and practices which create distortions in the free )arket. To achie$e these ends# this
Sec%rities =e!%lation Code is hereb" enacted.
Section . 'efnition of Terms. - *.1. "Sec%rities" are shares# participation or interests in a corporation or
in a co))ercial enterprise or prot-)akin! $ent%re and e$idenced b" a certicate# contract# instr%)ents#
whether written or electronic in character. +t incl%des-
(a) Shares of stocks# bonds# debent%res# notes e$idences of indebtedness# asset-backed sec%rities1
(b) +n$est)ent contracts# certicates of interest or participation in a prot sharin! a!ree)ent#
certies of deposit for a f%t%re s%bscription1
(c) :ractional %ndi$ided interests in oil# !as or other )ineral ri!hts1
(d) 9eri$ati$es like option and warrants1
(e) Certicates of assi!n)ents# certicates of participation# tr%st certicates# $otin! tr%st
certicates or si)ilar instr%)ents
(f) Proprietar" or nonproprietar" )e)bership certicates in corporations1 and
(!) Dther instr%)ents as )a" in the f%t%re be deter)ined b" the Co))ission.
*.(. "+ss%er" is the ori!inator# )aker# obli!or# or creator of the sec%rit".
*.*. "Hroker" is a person en!a!ed in the b%siness of b%"in! and sellin! sec%rities for the acco%nt of others.
*.,. "9ealer" )eans )an" person who b%"s sells sec%rities for his@her own acco%nt in the ordinar" co%rse
of b%siness.
GSV-*2
*.2. "Associated person of a broker or dealer" is an e)plo"ee therefor who)# directl" e&ercises control of
s%per$isor" a%thorit"# b%t does not incl%de a sales)an# or an a!ent or a person whose f%nctions are solel"
clerical or )inisterial.
*.5. "Clearin! A!enc"" is an" person who acts as inter)ediar" in )akin! deli$eries %pon pa")ent e/ect
settle)ent in sec%rities transactions.
*.7. "0&chan!e" is an or!ani'ed )arket place or facilit" that brin!s to!ether b%"ers and sellers and
e&ec%tes trade of sec%rities and@or co))odities.
*.8. "+nsider" )eans (a) the iss%er1 (b) a director or o?cer (or an" person perfor)in! si)ilar f%nctions) of#
or a person controllin! the iss%er1 !i$es or !a$e hi) access to )aterial infor)ation abo%t the iss%er or the
sec%rit" that is not !enerall" a$ailable to the p%blic1 (d) A !o$ern)ent e)plo"ee# director# or o?cer of an
e&chan!e# clearin! a!enc" and@or self-re!%lator" or!ani'ation who has access to )aterial infor)ation
abo%t an iss%er or a sec%rit" that is not !enerall" a$ailable to the p%blic1 or (e) a person who learns s%ch
infor)ation b" a co))%nication fro) an" for!oin! insiders.
*.A. "Pre-need plans" are contracts which pro$ide for the perfor)ance of f%t%re ser$ices of or the pa")ent
of f%t%re )onetar" considerations at the ti)e act%al need# for which plan holders pa" in cash or
install)ent at stated prices# with or witho%t interest or ins%rance co$era!e and incl%des life# pension#
ed%cation# inter)ent# and other plans which the Co))ission )a" fro) ti)e to ti)e appro$e.
*.13. "Pro)oter" is a person who# actin! alone or with others# takes initiati$e in fo%ndin! and or!ani'in!
the b%siness or enterprise of the iss%er and recei$es consideration therefor.
*.11. "Prospect%s" is the doc%)ent )ade b" or an behalf of an iss%er# %nderwriter or dealer to sell or o/er
sec%rities for sale to the p%blic thro%!h re!istration state)ent led with the Co))ission.
*.1(. "=e!istration state)ent" is the application for the re!istration of sec%rities re.%ired to be led with
the Co))ission.
*.1*. "Sales)an" is a nat%ral person# e)plo"ed as s%ch as an a!ent# b" a dealer# iss%er or broker to b%"
and sell sec%rities.
*.1,. "Bncerticated sec%rit"" is a sec%rit" e$idenced b" electronic or si)ilar records.
*.12. "Bnderwriter" is a person who !%arantees on a r) co))it)ent and@or declared best e/ort basis the
distrib%tion and sale of sec%rities of an" kind b" another co)pan".
CHAPTER II
SEC(RITIES AND E,CHANGE COMMISSION
Section !. !dministrati%e !.ency. M ,.1. This Code shall be ad)inistered b" the Sec%rit" and 0&chan!e
Co))ission (hereinafter referred to as the "Co))ission") as a Colle!ial bod"# co)posed of a chairperson
and (,) Co))issioners# appointed b" the President for a ter) of (7) se$en "ears each and who shall ser$es
as s%ch %ntil their s%ccessor shall ha$e been appointed and .%alied. A Co))issioner appointed to ll a
$acanc" occ%rrin! prior to the e&piration of the ter) for which his@her predecessor was appointed# shall
ser$e onl" for the %ne&pired portion of their ter)s %nder Presidential 9ecree Eo. A3(-A. Bnless the conte&t
indicates otherwise# the ter) "Co))issioner" incl%des the Chairperson.
,.(. The Co))issioners )%st be nat%ral-born citi'ens of the Philippines# at least fort" (,3) "ears of a!e for
the Chairperson and at least thirt"-$e (*2) "ears of a!e for the Co))issioners# of !ood )oral character#
or %n.%estionable inte!rit"# of known probit" and patriotis)# and with reco!ni'ed co)petence in social
and econo)ic disciplines- /ro%ided# That the )a<orit" of Co))issioners# incl%din! the Chairperson# shall
be )e)bers of the Philippine Har.
,.*. The chairperson is chief e&ec%ti$e o?cer of the Co))ission. The Chairperson shall e&ec%te and
ad)inister the policies# decisions# orders and resol%tions appro$ed b" the Co))ission and shall ha$e the
!eneral e&ec%ti$e direction and s%per$ision of the work and operation of the Co))ission and itNs
)e)bers# bodies# boards# o?ces# personnel and all its ad)inistrati$e b%siness.
,.,. The salar" of the Chairperson and the Co))issioners shall be &ed b" the President of the Philippines
based on the ob<ecti$e classication s"ste)# at a s%) co)parable to the )e)bers of the 6onetar" Hoard
and co))ens%rate i)portance and responsibilities attached to the position.
,.2. The Co))ission shall hold )eetin!s at least once a week for the cond%ct of b%siness or as often as
)a" be necessar" %pon the call of the Chairperson or %pon the re.%est of (*) Co))issioners. The notice of
GSV-*5
the )eetin! shall be !i$en to all Co))issioners and the presence of three (*) Co))issioners shall
constit%te a .%or%). +n the absence of the Chairperson# the )ost senior Co))issioner shall act as
presidin! o?cer of the )eetin!.
,.5. The Co))ission )a"# for p%rposes of e?cienc"# dele!ate an" of its f%nctions to an" depart)ent of
o?ce of the Co))ission# an indi$id%al Co))issioner or sta/ )e)ber of the Co))ission e&cept its re$iew
or appellate a%thorit" and its power to adopt# alter and s%pple)ent an" r%le or re!%lation.
The co))ission )a" re$iew %pon its own initiati$e or %pon the petition of an" interested part" an" action
of an" depart)ent or o?ce# indi$id%al Co))issioner# or sta/ )e)ber of the Co))ission.
Section ". /owers and Functions of the Commission.M 2.1. The co))ission shall act with transparenc"
and shall ha$e the powers and f%nctions pro$ided b" this code# Presidential 9ecree Eo. A3(-A# the
Corporation Code# the +n$est)ent Jo%ses law# the :inancin! Co)pan" Act and other e&istin! laws.
P%rs%ant thereto the Co))ission shall ha$e# a)on! others# the followin! powers and f%nctions-
(a) Ja$e <%risdiction and s%per$ision o$er all corporations# partnership or associations who are the
!rantees of pri)ar" franchises and@or a license or a per)it iss%ed b" the Go$ern)ent1
(b) :or)%late policies and reco))endations on iss%es concernin! the sec%rities )arket# ad$ise
Con!ress and other !o$ern)ent a!encies on all aspect of the sec%rities )arket and propose
le!islation and a)end)ents thereto1
(c) Appro$e# re<ect# s%spend# re$oke or re.%ire a)end)ents to re!istration state)ents# and
re!istration and licensin! applications1
(d) =e!%late# in$esti!ate or s%per$ise the acti$ities of persons to ens%re co)pliance1
(e) S%per$ise# )onitor# s%spend or take o$er the acti$ities of e&chan!es# clearin! a!encies and
other S=Ds1
(f) +)pose sanctions for the $iolation of laws and r%les# re!%lations and orders# and iss%ed p%rs%ant
thereto1
(!) Prepare# appro$e# a)end or repeal r%les# re!%lations and orders# and iss%e opinions and pro$ide
!%idance on and s%per$ise co)pliance with s%ch r%les# re!%lation and orders1
(h) 0nlist the aid and s%pport of and@or dep%ti'ed an" and all enforce)ent a!encies of the
Go$ern)ent# ci$il or )ilitar" as well as an" pri$ate instit%tion# corporation# r)# association or
person in the i)ple)entation of its powers and f%nction %nder its Code1
(i) +ss%e cease and desist orders to pre$ent fra%d or in<%r" to the in$estin! p%blic1
(<) P%nish for the conte)pt of the Co))ission# both direct and indirect# in accordance with the
pertinent pro$isions of and penalties prescribed b" the =%les of Co%rt1
(k) Co)pel the o?cers of an" re!istered corporation or association to call )eetin!s of stockholders
or )e)bers thereof %nder its s%per$ision1
(l) +ss%e s%bpoena d%ces tec%) and s%))on witnesses to appear in an" proceedin!s of the
Co))ission and in appropriate cases# order the e&a)ination# search and sei'%re of all doc%)ents#
papers# les and records# ta& ret%rns and books of acco%nts of an" entit" or person %nder
in$esti!ation as )a" be necessar" for the proper disposition of the cases before it# s%b<ect to the
pro$isions of e&istin! laws1
()) S%spend# or re$oke# after proper notice and hearin! the franchise or certicate of re!istration of
corporations# partnership or associations# %pon an" of the !ro%nds pro$ided b" law1 and
(n) 0&ercise s%ch other powers as )a" be pro$ided b" law as well as those which )a" be i)plied
fro)# or which are necessar" or incidental to the carr"in! o%t of# the e&press powers !ranted the
Co))ission to achie$e the ob<ecti$es and p%rposes of these laws.
2.(. The Co))issionNs <%risdiction o$er all cases en%)erated %nder section 2 of Presidential 9ecree Eo.
A3(-A is hereb" transferred to the Co%rts of !eneral <%risdiction or the appropriate =e!ional Trial
Co%rt-/ro%ided# That the S%pre)e Co%rt in the e&ercise of its a%thorit" )a" desi!nate the =e!ional Trial
Co%rt branches that shall e&ercise <%risdiction o$er the cases. The Co))ission shall retain <%risdiction o$er
pendin! cases in$ol$in! intra-corporate disp%tes s%b)itted for nal resol%tion which sho%ld be resol$ed
GSV-*7
within one (1) "ear fro) the enact)ent of this Code. The Co))ission shall retain <%risdiction o$er pendin!
s%spension of pa")ent@rehabilitation cases led as of *3 O%ne (333 %ntil nall" disposed.
Section 6. "ndemnifcation and Responsibilities of Commissioners.M 5.1. The Co))ission shall inde)nif"
each Co))issioner and other o?cials of the Co))ission# incl%din! personnel perfor)in! s%per$ision and
e&a)ination f%nctions for all cost and e&penses reasonabl" inc%rred b" s%ch persons in connection with
an" ci$il or cri)inal actions# s%its or proceedin!s to be liable for !ross ne!li!ence or )iscond%ct. +n the
e$ent of settle)ent or co)pro)ise# inde)nication shall be pro$ided onl" in connection with s%ch )atters
co$ered b" the settle)ent as to which the Co))ission is ad$ised b" e&ternal co%nsel that the persons to
be inde)nied did not co))it an" !ross ne!li!ence or )iscond%ct. The costs and e&penses inc%rred in
defendin! the afore)entioned action# s%it or proceedin! )a" be paid b" the Co))ission in ad$ance of the
nal disposition of s%ch action# s%it or proceedin! %pon receipt of an %ndertakin! b" or on behalf of the
Co))issioner# o?cer or e)plo"ee to repa" the a)o%nt ad$anced sho%ld it %lti)atel" be deter)ined b"
the Co))ission that he@she is not entitled to be inde)nied as pro$ided in this s%bsection.
5.(. The Co))issioners# o?cers and e)plo"ees of the Co))ission who willf%ll" $iolate this Code or who
are !%ilt" of ne!li!ence# ab%se or acts of )alfeasance or fail to e&ercise e&traordinar" dili!ence in the
perfor)ance of their d%ties shall be held liable for an" loss or in<%r" s%/ered b" the Co))ission or other
instit%tions s%ch as a res%lt of s%ch $iolation# ne!li!ence# ab%se# or )alfeasance# or fail%re to e&ercise
e&traordinar" dili!ence. Si)ilar responsibilit" shall appl" to the Co))issioners# o?cers and e)plo"ees of
the Co))ission for (1) the disclos%re of an" infor)ation# disc%ssion or resol%tion of the Co))ission of a
condential nat%re# or abo%t the condential operations of the Co))ission %nless the disclos%re is in
connection with the perfor)ance of o?cial f%nctions with the Co))ission or prior a%thori'ation of the
Co))issioners1 or (() the %se of s%ch infor)ation for personal !ain or to the detri)ent of the !o$ern)ent#
the Co))ission or third parties- Pro$ided# howe$er# That an" data or infor)ation re.%ired to be s%b)itted
to the President and@or Con!ress or its appropriate co))ittee# or to be p%blished %nder the pro$isions of
this Code shall not be considered condential.
Section #. Reor.ani9ation. M 7.1. To achie$e the !oals of this Code# consistent with the Ci$il Ser$ice laws#
the Co))ission is hereb" a%thori'ed to pro$ide for its reor!ani'ation# to strea)line its str%ct%re and
operations# %p!rade its h%)an reso%rce co)ponent and enable it to )ore e?cientl" and e/ecti$el"
perfor) its f%nctions and e&ercise its power %nder this Code.
7.(. All positions of the Co))issions shall be !o$erned b" a co)pensation and position classication
s"ste) and .%alication standards appro$ed b" the Co))ission based on co)prehensi$e <ob anal"sis and
a%dit of act%al d%ties and personal responsibilities. The co)pensation plan shall be co)parable with the
pre$ailin! co)pensation plan in the Han!ko Sentral n! Pilipinas and other !o$ern)ent nancial instit%tions
and shall be s%b<ect to periodic re$iew b" the Co))ission no )ore than once e$er" two (() "ears witho%t
pre<%dice to "earl" )erit re$iew or increases based on prod%cti$it" and e?cienc". The Co))ission shall#
therefore# be e&e)pt fro) laws# r%les# and re!%lations on co)pensation# position classication and
.%alications standards. The Co))ission shall# howe$er# endea$or to )ake its s"ste) confor) as closel"
as possible with the principles %nder the Co)pensation and Position Classication Act of 1A8A (=ep%blic
Act. 5728# as a)ended).
CHAPTER III
REGISTRATION OF SEC(RITIES
Section 8. Requirement of Re.istration of 1ecurities.M 8.1. Sec%rities shall not be sold or o/ered for sale
or distrib%tion within the Philippines# witho%t a re!istration state)ent d%l" led with and appro$ed b" the
Co))ission. Prior to s%ch sale# infor)ation on the sec%rities# in s%ch for) and with s%ch s%bstance as the
Co))ission )a" prescribe# shall be )ade a$ailable to each prospecti$e p%rchaser.
8.(. The Co))ission )a" conditionall" appro$e the re!istration state)ent %nder s%ch ter)s as it )a"
dee) necessar".
8.*. The Co))ission )a" specif" the ter)s and conditions %nder which an" written co))%nication#
incl%din! an" s%))ar" prospect%s# shall be dee)ed not to constit%te an o/er for sale %nder this Section.
8.,. A record of the re!istration of sec%rities shall be kept in =e!ister Sec%rities in which shall be recorded
orders entered b" the Co))ission with respect s%ch sec%rities. S%ch re!ister and all doc%)ents or
infor)ation with the respect to the sec%rities re!istered therein shall be open to p%blic inspection at
reasonable ho%rs on b%siness da"s.
8.2. The Co))ission )a" a%dit the nancial state)ents# assets and other infor)ation of r) appl"in! for
re!istration of its sec%rities whene$er it dee)s the sa)e necessar" to ins%re f%ll disclos%re or to protect
the interest of the in$estors and the p%blic in !eneral.
GSV-*8
Section $. (&empt 1ecurities. M A.1. The re.%ire)ent of re!istration %nder S%bsection 8.1 shall not as a
!eneral r%le appl" to an" of the followin! classes of sec%rities-
(a) An" sec%rit" iss%ed or !%aranteed b" the Go$ern)ent of the Philippines# or b" an" political
s%bdi$ision or a!enc" thereof# or b" an" person controlled or s%per$ised b"# and actin! as an
instr%)entalit" of said Go$ern)ent.
(b) An" sec%rit" iss%ed or !%aranteed b" the !o$ern)ent of an" co%ntr" with which the Philippines
)aintains diplo)atic relations# or b" an" state# pro$ince or political s%bdi$ision thereof on the basis
of reciprocit"- Pro$ided# That the Co))ission )a" re.%ire co)pliance with the for) and content for
disclos%res the Co))ission )a" prescribe.
(c) Certicates iss%ed b" a recei$er or b" a tr%stee in bankr%ptc" d%l" appro$ed b" the proper
ad<%dicator" bod".
(d) An" sec%rit" or its deri$ati$es the sale or transfer of which# b" law# is %nder the s%per$ision and
re!%lation of the D?ce of the +ns%rance Co))ission# Jo%sin! and Cand Bse =%le =e!%lator" Hoard#
or the H%rea% of +nternal =e$en%e.
(e) An" sec%rit" iss%ed b" a bank e&cept its own shares of stock.
A.(. The Co))ission )a"# b" r%le or re!%lation after p%blic hearin!# add to the fore!oin! an" class of
sec%rities if it nds that the enforce)ent of this Code with respect to s%ch sec%rities is not necessar" in
the p%blic interest and for the protection of in$estors.
Section 1&. (&empt Transactions. M 13.1. The re.%ire)ent of re!istration %nder S%bsection 8.1 shall not
appl" to the sale of an" sec%rit" in an" of the followin! transactions-
(a) At an" <%dicial sale# or sale b" an e&ec%tor# ad)inistrator# !%ardian or recei$er or tr%stee in
insol$enc" or bankr%ptc".
(b) H" or for the acco%nt of a pled!e holder# or )ort!a!ee or an" of a pled!e lien holder sellin! of
o/erin! for sale or deli$er" in the ordinar" co%rse of b%siness and not for the p%rpose of a$oidin!
the pro$ision of this Code# to li.%idate a bonafde debt# a sec%rit" pled!ed in !ood faith as sec%rit"
for s%ch debt.
(c) An isolated transaction in which an" sec%rit" is sold# o/ered for sale# s%bscription or deli$er" b"
the owner therefore# or b" his representati$e for the ownerNs acco%nt# s%ch sale or o/er for sale or
o/er for sale# s%bscription or deli$er" not bein! )ade in the co%rse of repeated and s%ccessi$e
transaction of a like character b" s%ch owner# or on his acco%nt b" s%ch representati$e and s%ch
owner or representati$e not bein! the %nderwriter of s%ch sec%rit".
(d) The distrib%tion b" a corporation acti$el" en!a!ed in the b%siness a%thori'ed b" its articles of
incorporation# of sec%rities to its stockholders or other sec%rit" holders as a stock di$idend or other
distrib%tion o%t of s%rpl%s.
(e) The sale of capital stock of a corporation to its own stockholders e&cl%si$el"# where no
co))ission or other re)%neration is paid or !i$en directl" or indirectl" in connection with the sale
of s%ch capital stock.
(f) The iss%ance of bonds or notes sec%red b" )ort!a!e %pon real estate or tan!ible personal
propert"# when the entire )ort!a!e to!ether with all the bonds or notes sec%red thereb" are sold to
a sin!le p%rchaser at a sin!le sale.
(!) The iss%e and deli$er" of an" sec%rit" in e&chan!e for an" other sec%rit" of the sa)e iss%er
p%rs%ant to a ri!ht of con$ersion entitlin! the holder of the sec%rit" s%rrendered in e&chan!e to
)ake s%ch con$ersion- /ro%ided# That the sec%rit" so s%rrendered has been re!istered %nder this
Code or was# when sold# e&e)pt fro) the pro$ision of this Code# and that the sec%rit" iss%ed and
deli$ered in e&chan!e# if sold at the con$ersion price# wo%ld at the ti)e of s%ch con$ersion fall
within the class of sec%rities entitled to re!istration %nder this Code. Bpon s%ch con$ersion the par
$al%e of the sec%rit" s%rrendered in s%ch e&chan!e shall be dee)ed the price at which the
sec%rities iss%ed and deli$ered in s%ch e&chan!e are sold.
(h) HrokerNs transaction# e&ec%ted %pon c%sto)erNs orders# on an" re!istered 0&chan!e or other
tradin! )arket.
GSV-*A
(i) S%bscriptions for shares of the capitals stocks of a corporation prior to the incorporation thereof
or in p%rs%ance of an increase in its a%thori'ed capital stocks %nder the Corporation Code# when no
e&pense is inc%rred# or no co))ission# co)pensation or re)%neration is paid or !i$en in
connection with the sale or disposition of s%ch sec%rities# and onl" when the p%rpose for solicitin!#
!i$in! or takin! of s%ch s%bscription is to co)pl" with the re.%ire)ents of s%ch law as to the
percenta!e of the capital stock of a corporation which sho%ld be s%bscribed before it can be
re!istered and d%l" incorporated# or its a%thori'ed# capital increase.
(<) The e&chan!e of sec%rities b" the iss%er with the e&istin! sec%rit" holders e&cl%si$el"# where no
co))ission or other re)%neration is paid or !i$en directl" or indirectl" for solicitin! s%ch e&chan!e.
(k) The sale of sec%rities b" an iss%er to fewer than twent" ((3) persons in the Philippines d%rin!
an" twel$e-)onth period.
(l) The sale of sec%rities to an" n%)ber of the followin! .%alied b%"ers-
(i) Hank1
(ii) =e!istered in$est)ent ho%se1
(iii) +ns%rance co)pan"1
(i$) Pension f%nd or retire)ent plan )aintained b" the Go$ern)ent of the Philippines or an"
political s%bdi$ision thereof or )ana!e b" a bank or other persons a%thori'ed b" the Han!ko
Sentral to en!a!e in tr%st f%nctions1
($) +n$est)ent co)pan" or1
($i) S%ch other person as the Co))ission )a" r%le b" deter)ine as .%alied b%"ers# on the
basis of s%ch factors as nancial sophistication# net worth# knowled!e# and e&perience in
nancial and b%siness )atters# or a)o%nt of assets %nder )ana!e)ent.
13.(. The Co))ission )a" e&e)pt other transactions# if it nds that the re.%ire)ents of re!istration
%nder this Code is not necessar" in the p%blic interest or for the protection of the in$estors s%ch as b" the
reason of the s)all a)o%nt in$ol$ed or the li)ited character of the p%blic o/erin!.
13.*. An" person appl"in! for an e&e)ption %nder this Section# shall le with the Co))ission a notice
identif"in! the e&e)ption relied %pon on s%ch for) and at s%ch ti)e as the Co))ission b" the r%le )a"
prescribe and with s%ch notice shall pa" to the Co))ission fee e.%i$alent to one-tenth (1@13) of one
percent (1>) of the )a&i)%) $al%e a!!re!ate price or iss%ed $al%e of the sec%rities.
Section 11. Commodity Futures Contracts. - Eo person shall o/er# sell or enter into co))odit" f%t%res
contracts e&cept in accordance with the r%les# re!%lations and orders the Co))ission )a" prescribe in the
p%blic interest. The Co))ission shall pro)%l!ate r%les and re!%lations in$ol$in! co))odit" f%t%res
contracts to protect in$estors to ens%re the de$elop)ent of a fair and transparent co))odities )arket.
Section 12. /rocedure of Re.istration 1ecurities. * 1(.1. All sec%rities re.%ired to be re!istered %nder
S%bsection 8. + shall be re!istered thro%!h the lin! b" the iss%er in the )ain o?ce of the Co))ission# of
a sworn re!istration state)ent with the respect to s%ch sec%rities# in s%ch for) and containin! s%ch
infor)ation and doc%)ent as the Co))ission prescribe. The re!istration state)ent shall incl%de an"
prospect%s re.%ired or per)itted to be deli$ered %nder S%bsections 8.(# 8.*# and 8.,.
1(.(. +n pro)%l!atin! r%les !o$ernin! the content of an" re!istration state)ent (incl%din! an" prospect%s
)ade a part thereof or anne& thereto)# the Co))ission )a" re.%ire the re!istration state)ent to contain
s%ch infor)ation or doc%)ents as it )a"# b" r%le# prescribe. +t )a" dispense with an" s%ch re.%ire)ents#
or )a" re.%ire additional infor)ation or doc%)ents# incl%din! written infor)ation fro) an e&pert#
dependin! on the necessit" thereof or their applicabilit" to the class of sec%rities so%!ht to be re!istered.
1(.*. The infor)ation re.%ired for the re!istration of an" kind# and all sec%rities# shall incl%de# a)on!
others# the e/ect of the sec%rities iss%e on ownership# on the )i& of ownership# especiall" forei!n and local
ownership.
1(.,. The re!istration state)ent shall be si!ned b" the iss%erNs e&ec%ti$e o?cer# its principal operatin!
o?cer# its principal nancial o?cer# its co)ptroller# its principal acco%ntin! o?cer# its corporate secretar"#
or persons perfor)in! si)ilar f%nctions acco)panied b" a d%l" $eried resol%tion of the board of directors
of the iss%er corporation. The written consent of the e&pert na)ed as ha$in! certied an" part of the
re!istration state)ent or an" doc%)ent %sed in connection therewith shall also be led. 4here the
GSV-,3
re!istration state)ent shares to be sold b" sellin! shareholders# a written certication b" s%ch sellin!
shareholders as to the acc%rac" of an" part of the re!istration state)ent contrib%ted to b" s%ch sellin!
shareholders shall be led.
1(.2. (a) Bpon lin! of the re!istration state)ent# the iss%er shall pa" to the Co))ission a fee of not )ore
than one-tenth (1@13) of one per centum (1>) of the )a&i)%) a!!re!ate price at which s%ch sec%rities
are proposed to be o/ered. The Co))ission shall prescribe b" the r%le di)inishin! fees in in$erse
proportion the $al%e of the a!!re!ate price of the o/erin!.
(b) Eotice of the lin! of the re!istration state)ent shall be i))ediatel" p%blished b" the iss%er# at
its own e&pense# in two (() newspapers of !eneral circ%lation in the Philippines# once a week for
two (() consec%ti$e weeks# or in s%ch other )anner as the Co))ission b" the r%le shall prescribe#
recitin! that a re!istration state)ent for the sale of s%ch sec%rities has been led# and that
aforesaid re!istration state)ent# as well as the papers attached thereto are open to inspection at
the Co))ission d%rin! b%siness ho%rs# and copies thereof# photostatic or otherwise# shall be
f%rnished to interested parties at s%ch reasonable char!e as the Co))ission )a" prescribe.
1(.5. 4ithin fort"-$e (,2) da"s after the date of lin! of the re!istration state)ent# or b" s%ch later date
to which the iss%er has consented# the Co))ission shall declare the re!istration state)ent e/ecti$e or
re<ected# %nless the applicant is allowed to a)end the re!istration state)ent as pro$ided in Section 1,
hereof. The Co))ission shall enter an order declarin! the re!istration state)ent to be e/ecti$e if it nds
that the re!istration state)ent to!ether with all the other papers and doc%)ents attached thereto# is on
its face co)plete and that the re.%ire)ents ha$e been co)plied with. The Co))ission )a" i)pose s%ch
ter)s and conditions as )a" be necessar" or appropriate for the protection of the in$estors.
1(.7. Bpon a/ecti$it" of the re!istration state)ent# the iss%er shall state %nder oath in e$er" prospect%s
that all re!istration re.%ire)ents ha$e been )et and that all infor)ation are tr%e and correct as
represented b" the iss%er or the one )akin! the state)ent. An" %ntr%e state)ent of fact or o)ission to
state a )aterial fact re.%ired to be stated herein or necessar" to )ake the state)ent therein not
)isleadin! shall constit%te fra%d.
Section 1. Re$ection and Re%ocation of Re.istration of 1ecurities. : 1*.1. The Co))ission )a" re<ect a
re!istration state)ent and ref%se re!istration of the sec%rit" there-%nder# or re$oke the a/ecti$it" of a
re!istration state)ent and the re!istration of the sec%rit" there-%nder after the d%e notice and hearin! b"
iss%in! an order to s%ch e/ect# settin! forth its ndin! in respect thereto# if it nds that-
(a) The iss%er-
(i) Jas been <%diciall" declared insol$ent1
(ii) Jas $iolated an" of the pro$ision of this Code# the r%les pro)%l!ate p%rs%ant thereto# or
an" order of the Co))ission of which the iss%er has notice in connection with the o/erin!
for which a re!istration state)ent has been led
(iii) Jas been or is en!a!ed or is abo%t to en!a!e in fra%d%lent transactions1
(i$) Jas )ade an" false or )isleadin! representation of )aterial facts in an" prospect%s
concernin! the iss%er or its sec%rities1
($) Jas failed to co)pl" with an" re.%ire)ents that the Co))ission )a" i)pose as a
condition for re!istration of the sec%rit" for which the re!istration state)ent has been led1
or
(b) The re!istration state)ent is on its face inco)plete or inacc%rate in an" )aterial respect or
incl%des an" %ntr%e state)ents of a )aterial fact re.%ired to be stated therein or necessar" to
)ake the state)ent therein not )isleadin!1 or
(c) The iss%er# an" o?cer# director or controllin! person perfor)in! si)ilar f%nctions# or an" %nder
writer has been con$icted# b" a co)petent <%dicial or ad)inistrati$e bod"# %pon plea of !%ilt"# or
otherwise# of an o/ense in$ol$in! )oral t%rpit%de and @or fra%d or is en<oined or restrained b" the
Co))ission or other co)petent or ad)inistrati$e bod" for $iolations of sec%rities# co))odities#
and other related laws.
:or the p%rposes of this s%bsection# the ter) "co)petent <%dicial or ad)inistrati$e bod"" shall incl%de a
forei!n co%rt of co)petent <%risdiction as pro$ided for %nder =%les of Co%rt.
GSV-,1
1*.(. The Co))ission )a" co)pel the prod%ction of all the books and papers of s%ch iss%er# and )a"
ad)inister oaths to# and e&a)ine the o?cers of s%ch the iss%er or an" other person connected therewith
as to its b%siness and a/airs.
1*.*. +f an" iss%er shall ref%se to per)it an e&a)ination to be )ade b" the Co))ission# its ref%sal shall be
!ro%nd for the ref%sal or re$ocation of the re!istration of its sec%rities.
1*.,. +f the Co))ission dee)s its necessar"# it )a" iss%e an order s%spendin! the o/er and sale of the
sec%rities pendin! an" in$esti!ation. The order shall state the !ro%nds for takin! s%ch action# b%t s%ch
order of s%spension altho%!h bindin! %pon the persons notied thereof# shall be dee)ed condential# and
shall not be p%blished. Bpon the iss%ance of the s%spension order# no f%rther o/er or sale of s%ch sec%rit"
shall be )ade %ntil the sa)e is lifted or set aside b" the Co))ission. Dtherwise# s%ch sale shall be $oid.
1*.2. Eotice of iss%ance of s%ch order shall be !i$en to the iss%er and e$er" dealer and broker who shall
ha$e notied the Co))ission of an intention to sell s%ch sec%rit".
1*.5. A re!istration state)ent )a" be withdrawn b" the iss%er onl" with the consent of the Co))ission.
Section 1!. !mendment to the Re.istration 1tatement. M 1,.1. +f a re!istration state)ent is on its face
inco)plete or inacc%rate in an" )aterial respect# the Co))ission shall iss%e an order directin! the
a)end)ent of the re!istration state)ent. Bpon co)pliance with s%ch order# the a)ended re!istration
state)ent shall beco)e e/ecti$e in accordance with the proced%re )entioned in S%bsection 1(.5 hereof.
1,.(. An a)end)ent led prior to the e/ecti$e date of the re!istration state)ent shall reco))ence the
fort"-$e (,2) da" period within which the Co))ission shall act on a re!istration state)ent. An
a)end)ent led after the e/ecti$e date of the re!istration state)ent shall beco)e e/ecti$e onl" %pon
s%ch date as deter)ined b" the Co))ission.
1,.*. +f an" chan!e occ%rs in the facts set forth in a re!istration state)ent# the iss%er shall le an
a)end)ent thereto settin! forth the chan!e.
1,.,. +f# at an" ti)e# the Co))ission nds that the re!istration state)ent contains an" false state)ent or
o)its to state an" fact re.%ired to be stated therein or necessar" to )ake the state)ents therein not
)isleadin!# the Co))ission )a" cond%ct an e&a)ination# and# after d%e notice and hearin!# iss%e an
order s%spendin! the a/ecti$it" re!istration state)ent. +f the state)ent is d%l" a)ended# the s%spension
order )a" be lifted.
1,.2. +n )akin! s%ch e&a)ination the Co))ission or an" o?cer or o?cers desi!nated b" it )a"
ad)inister oaths and a?r)ations and shall ha$e access to# and )a" de)and the prod%ction of# an" books#
records or doc%)ents rele$ant to the e&a)ination. :ail%re of the iss%er# %nderwriter# or an" other person
to cooperate# or his obstr%ction or ref%sal to %nder!o an e&a)ination# shall be a !ro%nd for the iss%ance of
a s%spension order.
Section 1". 1uspension of Re.istration. - 12.1. +f at an" ti)e# the infor)ation contained in the re!istration
state)ent led is or has beco)e )isleadin!# incorrect# inade.%ate or inco)plete in an" )aterial respect#
or the sale or o/erin! for sale of the sec%rit" re!istered there%nder )a" work or tend to work a fra%d# the
Co))ission )a" re.%ire fro) the iss%er s%ch f%rther infor)ation as )a" in its <%d!e)ent be necessar" to
enable the Co))ission to ascertain whether the re!istration of s%ch sec%rit" sho%ld be re$oked on an"
!ro%nd specied in this Code. The Co))ission )a" also s%spend the ri!ht to sell and o/er for the sale
s%ch sec%rit" pendin! f%rther in$esti!ation# b" enterin! an order specif"in! the !ro%nds for s%ch action#
and b" notif"in! the iss%er# %nderwriter# dealer or broker known as participatin! in s%ch o/erin!.
12.(. The ref%sal to f%rnish infor)ation re.%ired b" the Co))ission )a" be a !ro%nd for the iss%ance of
an order of s%spension p%rs%ant to S%bsection 12.1. Bpon the iss%ance of an" s%ch order and notication
to the iss%er# %nderwriter# dealer or broken know as participatin! in s%ch o/erin!# no f%rther o/er or sale
of an" s%ch sec%rit" shall be )ade %ntil the sa)e is lifted or set aside b" the Co))ission. Dtherwise s%ch
sale shall be $oid.
12.*. Bpon iss%ance of an order of s%spension# the Co))ission shall cond%ct a hearin!. +f the Co))ission
deter)ines that the sale of an" sec%rit" sho%ld be re$oked is shall iss%e an order prohibitin! sale of s%ch
sec%rit".
12.,. Bntil the iss%ance of a nal order# the s%spension of the ri!ht to sell# tho%!h bindin! %pon the
persons notied there of# shall be dee)ed condential# and shall not be p%blished# %nless it shall appear
that the order of s%spension has been $iolated after notice. +f# howe$er# the Co))ission nds that the sale
of the sec%rit" will neither be fra%d%lent nor res%lt in fra%d# it shall forthwith iss%e an order re$okin! the
order of s%spension# and s%ch sec%rit" shall be restored to its stat%s as a re!istered sec%rit" as of the date
of s%ch order of s%spension.
GSV-,(
CHAPTER IV
REG(LATION OF PRE-NEED PLANS
Section 16. /re*Need /lans. M Eo person shall sell or o/er for sale to the p%blic an" pre-need plan e&cept
in accordance with r%les and re!%lations which the Co))ission shall prescribe. S%ch r%les shall re!%late
the sale of pre-need plans b"# a)on! other thin!s# re.%irin! the re!istration of pre-need plans# licensin!
persons in$ol$ed in the sale of pre- need plans# re.%irin! disclos%res to prospecti$e plan holders#
prescribin! ad$ertisin! !%idelines# pro$idin! for %nifor) acco%ntin! s"ste)# reports and recordin! keepin!
with respect to s%ch plans# i)posin! capital# bondin! and other nancial responsibilit"# and establishin!
tr%st f%nds for the pa")ent of benets %nder s%ch plans.
CHAPTER V
REPORTORIAL RE-(IREMENTS
Section 1#. /eriodic and 7ther Reports of "ssuer. 17.1. 0$er" iss%er satisf"in! the re.%ire)ents in
S%bsection 17.( hereof shall le with the Co))ission-
(a) 4ithin one h%ndred thirt"-$e (1*2) da"s# after the end of the iss%erNs scal "ear# or s%ch other
ti)e as the Co))ission )a" prescribe# an ann%al report which shall incl%de# a)on! others# a
balance sheet# prot and loss state)ent and state)ent of cash Lows# for s%ch last scal "ear#
certied p%blic acco%ntant# an a )ana!e)ent disc%ssion and anal"sis of res%lts of operation1 and
(b) S%ch other periodical reports for interi) scal periods and c%rrent reports on si!nicant
de$elop)ents of the iss%er as the Co))ission )a" prescribe as necessar" to keep c%rrent
infor)ation on the operation of the b%siness and nancial condition of the iss%er.
17.(. The reportorial re.%ire)ents of S%bsection 17.1 shall appl" to the followin!-
(a) An iss%er which has sold a class of its sec%rities p%rs%ant to a re!istration %nder section 1(
hereof-/ro%ided howe%er, That the obli!ation of s%ch iss%er to le reports shall be s%spended for
an" scal "ear after the "ear s%ch re!istration beca)e e/ecti$e if s%ch iss%er# as of the rst da" of
an" s%ch scal "ear# has less than one h%ndred (133) holder of s%ch class sec%rities or s%ch other
n%)ber as the Co))ission shall prescribe and it noties the Co))ission of s%ch1
(b) An iss%er with a class of sec%rities listed for tradin! on an 0&chan!e1 and
(c) An iss%er with assets of at least :ift" )illion pesos (23#333#333.33) or s%ch other a)o%nt as the
Co))ission shall prescribe# and ha$in! two h%ndred ((33) or )ore holder each holdin! at least one
h%ndred (133) share of a class of its e.%it" sec%rities- /ro%ided, howe%er# That the obli!ation of
s%ch iss%er to le report shall be ter)inate ninet" (A3) da"s after notication to the Co))ission b"
the iss%er that the n%)ber of its holders holdin! at least one h%ndred (133) share red%ced to less
than one h%ndred (133).
17.*. 0$er" iss%er of a sec%rit" listed for tradin! on an 0&chan!e a cop" of an" report led with the
Co))ission %nder S%bsection 17.1. hereof.
17.,. All reports (incl%din! nancial state)ents) re.%ired to be led with the Co))ission p%rs%ant to
S%bsection 17.1 hereof shall be in s%ch for)# contain s%ch infor)ation and be led at s%ch ti)es as the
Co))ission shall prescribe# and shall be in lie% of an" periodical or c%rrent reports or nancial state)ents
otherwise re.%ired to be led %nder the Co))ission shall prescribe.
17.2. 0$er" iss%er which has a class of e.%it" sec%rities satisf"in! an" of the re.%ire)ents in S%bsection
17.( shall f%rnish to each holder of s%ch e.%it" sec%rit" an ann%al report in s%ch for) and containin! s%ch
infor)ation as the Co))ission shall prescribe.
17.5. 4ithin s%ch period as the Co))ission )a" prescribe precedin! the ann%al )eetin! of the holders of
an" e.%it" sec%rit" of a class entitled to $ote at s%ch )eetin! # the iss%er shall trans)it to s%ch holders an
ann%al report in confor)it" with s%bsection 17.2.
Section 18. Reports by f%e per centum ;<=> 6olders of (quity 1ecurities. M 18.1. +n e$er" case in which
an iss%er satises the re.%ire)ents of S%bsection 17.( hereof an" person who ac.%ires directl" or
indirectl" the benecial ownership of )ore than $e of per cent%) (2>) of s%ch class or in e&cess of s%ch
lesser per cent%) as the Co))ission b" r%le )a" prescribe# shall# within ten (13) da"s after s%ch
ac.%isition or s%ch reasonable ti)e as &ed b" the Co))ission# s%b)it to the iss%er of the sec%rities# to
the 0&chan!e where the sec%rit" is traded# and to the Co))ission a sworn state)ent containin! the
followin! infor)ation and s%ch order infor)ation as the Co))ission )a" re.%ire in the p%blic interest or
for the protection of in$estors.
GSV-,*
(a) The personal back!ro%nd# identit"# residence# and citi'enship of# and the nat%re of s%ch
benecial ownership b"# s%ch person and all other person b" who) or on whose behalf the
p%rchases are e/ected1 in the e$ent the benecial owner is a <%ridical person# the of b%siness of the
benecial owner shall also be reported1
(b) +f the p%rpose of the p%rchases or prospecti$e p%rchases is to ac.%ire control of the b%siness of
the iss%er of the sec%rities# an" plans or proposals which s%ch persons )a" ha$e that will e/ect a
)a<or chan!e in its b%siness or corporate str%ct%re1
(c) The n%)ber of shares of s%ch sec%rit" which are beneciall" owned# and the n%)ber of shares
concernin! which there is a ri!ht to ac.%ire# directl" or indirectl"# b"1 (i) s%ch person# and (ii) each
associate of s%ch person# !i$in! the back!ro%nd# identit"# residence# and citi'enship of each s%ch
associate1 and
(d) +nfor)ation as to an" contracts# arran!e)ents# or %nderstandin! with an" person with respect
to an" sec%rities of the iss%er incl%din! b%t not li)ited to transfer# <oint $ent%res# loan or option
arran!e)ents# p%ts or call !%arantees or di$ision of losses or prots# or pro&ies na)in! the persons
with who) s%ch contracts# arran!e)ents# or %nderstandin! ha$e been entered into# and !i$in! the
details thereof.
18.(. +f an" chan!e occ%rs in the facts set forth in the state)ents# an a)end)ent shall be trans)itted to
the iss%er# the 0&chan!e and the Co))ission.
18.*. The Co))ission# )a" per)it an" person to le in lie% of the state)ent re.%ired b" s%bsection 17.1
hereof# a notice statin! the na)e of s%ch person# the shares of an" e.%it" sec%rities s%b<ect to S%bsection
17.1 which are owned b" hi)# the date of their ac.%isition and s%ch other infor)ation as the co))ission
)a" specif"# if it appears to the co))ission that s%ch sec%rities were ac.%ired b" s%ch person in the
ordinar" co%rse of his b%siness and were not ac.%ired for the p%rpose of and do not ha$e the e/ect of
chan!in! or inL%encin! the control of the iss%er nor in connection with an" transaction ha$in! s%ch
p%rpose or e/ect.
CHAPTER VI
PROTECTION OF SHAREHOLDERS INTERESTS
Section 1$. Tender 7)ers. M An" person or !ro%p of persons actin! in concert who intends to ac.%ire at
least 12> of an" class of an" e.%it" sec%rit" of a listed corporation of an" class of an" e.%it" sec%rit" of a
corporation with assets of at least ft" )illion pesos (23#333#333.33) and ha$in! two h%ndred((33) or
)ore stockholders at least one h%ndred shares each or who intends to ac.%ire at least thirt" percent(*3>)
of s%ch e.%it" o$er a period of twel$e )onths(1() shall )ake a tender o/er to stockholders b" llin! with
the Co))ission a declaration to that e/ect1 and f%rnish the iss%er# a state)ent containin! s%ch of the
infor)ation re.%ired in Section 17 of this Code as the Co))ission )a" prescribe. S%ch person or !ro%p of
persons shall p%blish all re.%est or in$itations or tender o/er or re.%estin! s%ch tender o/ers s%bse.%ent
to the initial solicitation or re.%est shall contain s%ch infor)ation as the Co))ission )a" prescribe# and
shall be led with the Co))ission and sent to the iss%er not alter than the ti)e copies of s%ch )aterials
are rst p%blished or sent or !i$en to sec%rit" holders.
(a) An" solicitation or reco))endation to the holders of s%ch a sec%rit" to accept or re<ect a tender
o/er or re.%est or in$itation for tenders shall be )ade in accordance with s%ch r%les and
re!%lations as )a" be prescribe.
(b) Sec%rities deposited p%rs%ant to a tender o/er or re.%est or in$itation for tenders )a" be
withdrawn b" or on behalf of the depositor at an" ti)e thro%!ho%t the period that tender o/er
re)ains open and if the sec%rities deposited ha$e not been pre$io%sl" accepted for pa")ent# and
at an" ti)e after si&t" (53) da"s fro) the date of the ori!inal tender o/er to re.%est or in$itation#
e&cept as the Co))ission )a" otherwise prescribe.
(c) 4here the sec%rities o/ered e&ceed that which person or !ro%p of persons is bo%nd or willin! to
take %p and pa" for# the sec%rities that are s%b<ect of the tender o/ers shall be taken %p %s nearl"
as )a" be pro data# disre!ardin! fractions# accordin! to the n%)ber of sec%rities deposited to each
depositor. The pro$ision of this s%b<ect shall also appl" to sec%rities deposited within ten (13) da"s
after notice of increase in the consideration o/ered to sec%rit" holders# as described in para!raph
(e) of this s%bsection# is rst p%blished or sent or !i$en to sec%rit" holders.
(d) 4here an" person $aries the ter)s of a tender o/er or re.%est or in$itation for tenders before
the e&piration thereof b" increasin! the consideration o/ered to holders of s%ch sec%rities# s%ch
person shall pa" the increased consideration to each sec%rit" holder whose sec%rities are taken %p
and paid for whether or not s%ch sec%rities ha$e been taken %p b" s%ch person before the $ariation
of the tender o/er or re.%est or in$itation.
GSV-,,
1A.(. +t shall be lawf%l for an" person to )ake an" %ntr%e state)ent of a )aterial fact or o)it to state an"
)aterial fact necessar" in order to )ake the state)ents )ade in the li!ht of the circ%)stances %nder
which the" are )ade# not )is-leadin!# or to en!a!ed to an" fra%d%lent# decepti$e or )anip%lati$e acts or
practices# in connection with an" tender o/er or re.%est or in$itation for tenders# or an" solicitation for an"
sec%rit" holders in opposition to or in fa$or of an" s%ch fa$or of an" s%ch o/er# re.%est# or in$itation. The
Co))ission shall# for the p%rposes of this s%bsection# dene and prescribe )eans reasonabl" desi!ned to
pre$ent# s%ch acts and practices as are fra%d%lent# decepti$e and )anip%lati$e.
Section 2&. /ro&y solicitations. - (3.1. Pro&ies )%st be iss%ed and pro&" solicitation )%st be )ade in
accordance with r%les and re!%lations to be iss%ed b" the Co))ission1
(3.(. Pro&ies )%st be in writin!# si!ned b" the stockholder or his d%l" a%thori'ed representati$e and le
before the sched%led )eetin! with the corporate secretar".
(3.*. Bnless otherwise pro$ided in the pro&"# it shall be $alid onl" for the )eetin! for which it is intended.
Eo pro&" shall be $alid onl" for the )etin! for which it is intended. Eo pro&" shall be $alid and e/ecti$e for
a period lon!er than $e (2) "ears at one ti)e.
(3.,. Eo broker or dealer shall !i$e an" pro&"# consent or an" a%thori'ation# in respect of an" sec%rit"
carried for the acco%nt of the c%sto)er# to a person other than the c%sto)er# witho%t written a%thori'ation
of s%ch c%sto)er.
(3.2. A broker or dealer who holds or ac.%ire the pro&" for at least ten percent (13>) or s%ch percenta!e
as the co))ission )a" prescribe of the o%tstandin! share of s%ch iss%er# shall s%b)it a report identif"in!
the benecial owner of ten da"s after s%ch ac.%isition# for its own acco%nt or c%sto)er# to the iss%er of
sec%rit"# to the e&chan!e where the sec%rit" is traded and to the Co))ission.
Section 21. Fees of Tender 7)ers and Certain /ro&y 1olicitations. M At the ti)e of llin! with the
Co))ission of an" state)ent re.%ired %nder Section 1A for an" tender o/er or Section 7(.( for iss%er
p%rchases# or Section (3 for pro&" or consent solicitation# The Co))ission )a" re.%ire that the person
)akin! s%ch lin! pa" a fee of not )ore than one-tenth (1@13)(1>) of1
(1.1. The propose a!!re!ate p%rchase price in the case of a transaction %nder Section (3 or 7(.(1 or
(1.(. The proposed pa")ent in cash# and ion $al%e of an" sec%rities or propert" to be transferred in the
ac.%isition# )er!er or consolidatin!# or the cash and $al%e of an" sec%rities proposed to be recei$ed %pon
the sale disposition of s%ch assets in the case of a solicitation %nder Section (3. The Co))ission shall
prescribe b" r%le di)inishin! fees in in$erse proportion to the $al%e of the a!!re!ate price of the o/erin!.
Section 22. "nternal Record 2eepin. and !ccountin. Control. - 0$er" iss%er which has a class of sec%rities
that satises the re.%ire)ents of S%bsection 17.( shall-
((.1. 9e$ice and )aintain a s"ste) of internal acco%ntin! controls s%?cient to pro$ide reasonable
ass%rance that- (a) Transactions and access to assets are p%rs%ant to )ana!e)ent a%thori'ation1 (b)
:inancial state)ents are pro$ided in confor)it" with !enerall" accepted acco%ntin! principles that are
adopted b" the Acco%ntin! standards co%ncil and the r%les pro)%l!ated b" the Co))ission with the
re!ard to the preparation of the nancial state)ents1 and (c) =ecorded assets are co)pared with e&istin!
assets at reasonable inter$als and di/erences are reconciled.
Section 2. Transactions of 'irectors o+cers and /rincipal 1tockholders. M (*.1. 0$er" person who is
directl" or indirectl" the benecial owner of )ore than ten per cent%) (13>) of an" class of an" e.%it"
sec%rit" which satises the re.%ire)ents of s%bsection 17.(# or who is a director or an o?cer of the iss%er
of s%ch sec%rit"# shall le# at the ti)e either s%ch re.%ire)ent is rst satised or after ten da"s after he
beco)es s%ch a benecial owner# director# or o?cer# a state)ent for) the Co))ission and# if s%ch
sec%rit" is listed for tradin! on an e&chan!e# also with the e&chan!e of the a)o%nt of all the e.%it"
sec%rit" of s%ch iss%er of which he is the benecial owner# and within ten da"s after the close of each
calendar )onth thereafter# if there has been a chan!e in s%ch ownership at the close of the calendar
)onth and s%ch chan!es in his ownership as ha$e occ%rred d%rin! s%ch calendar )onth.
(*.(. :or the p%rpose of pre$entin! the %nfair %se of infor)ation which )a" ha$e been obtained b" s%ch
benecial owner# director or o?cer b" reason of his relationship to the iss%er# an" prot reali'ed b" hi)
fro) an" p%rchase or sale# or an" sale or p%rchase# of an" e.%it" sec%rit" of s%ch iss%er within an" period
of less than (5) )onths %nless s%ch sec%rit" was ac.%ired in !ood faith in connection with a debt
pre$io%sl" contracted# shall in%re to and be reco$erable b" the iss%er# irrespecti$e of an" intention of
holdin! the sec%rit" p%rchased or of not rep%rchasin! the sec%rit" sold for a period e&ceedin! si& (5)
)onths. S%it to reco$er s%ch prot )a" be instit%ted before the =e!ional Trial Co%rt b" the iss%er# or b"
the owner of an" sec%rit" of the iss%er in the na)e and in behalf of the iss%er if the iss%er shall fail or
ref%se to brin! s%ch s%it within si&t" (53) da"s after re.%est or shall fail dili!entl" to prosec%te the sa)e
GSV-,2
thereafter# b%t not s%ch shall be bro%!ht )ore than two "ears after the date s%ch prot was reali'ed. This
S%bsection shall not be constr%ed to co$er an" transaction were s%ch benecial owner was not s%ch both
ti)e of the owner or the sale# or the sale of p%rchase# of the sec%rit" in$ol$ed# or an" transaction or
transactions which the Co))ission b" r%les and re!%lations )a" e&e)pt as not co)prehended within the
p%rpose of this s%bsection.
(*.*. +t shall be %nlawf%l for an" s%ch benecial owner# director or o?cer# directl" or indirectl"# to sell an"
e.%it" sec%rit" of s%ch iss%er if the person sellin! the principal- (a) 9oes not own the sec%rit" sold- or (b) +f
ownin! the sec%rit"# does not deli$er not deli$er it a!ainst s%ch sale within (3 da"s thereafter# or does not
within $e da"s after s%ch sale deposit in the )ails or the %n%s%al channels of transportation1 b%t no
person shall be dee)ed to ha$e $iolated this s%bsection if he pro$es not withstandin! the e&ercise of !ood
faith he was %nable to )ake s%ch deli$er" in s%ch ti)e# or that to do so wo%ld ca%se %nd%e incon$enience
or e&pense.
(*.,. The pro$isions of s%bsection (*.( shall not appl" to an" p%rchase and sale# or sale and p%rchase# and
the pro$isions of S%bsection (*.* shall not appl" to an" sale# of an e.%it" sec%rit" not then or thereafter
held b" hi) and an in$est)ent acco%nt# b" a dealer in the ordinar" co%rse of his b%siness and incident to
the establish)ent or )aintenance b" hi) of a pri)ar" or secondar" )arket# otherwise than on an
0&chan!e# for s%ch sec%rit". The Co))ission )a"# b" s%ch r%les and re!%lations as it dee)s necessar" or
appropriate in the p%blic interest# dene and prescribe ter)s and conditions with respect to sec%rities held
in an in$est)ent acco%nt and transactions )ade in the ordinar" co%rse of b%siness and incident to the
establish)ent or )aintenance of a pri)ar" or secondar" )arket.
CHAPTER VII
PROHIBITIONS AND FRA(D. MANIP(LATION AND INSIDER TRADING
Section 2!. anipulation of 1ecurity /rices0 'e%ices and /ractices. M (,.1 +t shall be %nlawf%l for an"
person actin! for hi)self or thro%!h a dealer or broker# directl" or indirectl"-
(a) To create a false or )isleadin! appearance of acti$e tradin! in an" listed sec%rit" traded in an
0&chan!e of an" other tradin! )arket (hereafter referred to p%rposes of this Chapter as
"0&chan!e")-
(i) H" e/ectin! an" transaction in s%ch sec%rit" which in$ol$es no chan!e in the benecial
ownership thereof1
(ii) H" enterin! an order or orders for the p%rchase or sale of s%ch sec%rit" with the
knowled!e that a si)%ltaneo%s order or orders of s%bstantiall" the sa)e si'e# ti)e and
price# for the sale or p%rchase of an" s%ch sec%rit"# has or will be entered b" or for the sa)e
or di/erent parties1 or
(iii) H" perfor)in! si)ilar act where there is no chan!e in benecial ownership.
(b) To a/ect# alone or with others# a sec%rities or transactions in sec%rities that- (+) =aises their price
to ind%ce the p%rchase of a sec%rit"# whether of the sa)e or a di/erent class of the sa)e iss%er or
of controllin!# controlled# or co))onl" controlled co)pan" b" others1 or (iii) Creates acti$e tradin!
to ind%ce s%ch a p%rchase or sale thro%!h )anip%lati$e de$ices s%ch as )arkin! the close# paintin!
the tape# s.%ee'in! the Loat# h"pe and d%)p# boiler roo) operations and s%ch other si)ilar
de$ices.
(c) To circ%late or disse)inate infor)ation that the price of an" sec%rit" listed in an 0&chan!e will or
is likel" to rise or fall beca%se of )anip%lati$e )arket operations of an" one or )ore persons
cond%cted for the p%rpose of raisin! or depressin! the price of the sec%rit" for the p%rpose of
ind%cin! the p%rpose of sale of s%ch sec%rit".
(d) To )ake false or )isleadin! state)ent with respect to an" )aterial fact# which he knew or had
reasonable !ro%nd to belie$e was so false or )isleadin!# for the p%rpose of ind%cin! the p%rchase
or sale of an" sec%rit" listed or traded in an 0&chan!e.
(e) To e/ect# either alone or others# an" series of transactions for the p%rchase and@or sale of an"
sec%rit" traded in an 0&chan!e for the p%rpose of pe!!in!# &in! or stabili'in! the price of s%ch
sec%rit"1 %nless otherwise allowed b" this Code or b" r%les of the Co))ission.
(,.(. Eo person shall %se or e)plo"# in connection with the p%rchase or sale of an" sec%rit" an"
)anip%lati$e or decepti$e de$ice or contri$ance. Eeither shall an" short sale be e/ected nor an" stop-loss
order be e&ec%ted in connection with the p%rchase or sale of an" sec%rit" e&cept in accordance with s%ch
r%les and re!%lations as the Co))ission )a" prescribe as necessar" or appropriate in the p%blic interest
GSV-,5
(,.*. The fore!oin! pro$isions notwithstandin!# the Co))ission# ha$in! d%e re!ard to the p%blic interest
and the protection of in$estors# )a"# b" r%les and re!%lations# allow certain acts or transactions that )a"
otherwise be prohibited %nder this Section.
Section 2". Re.ulation of 7ption Tradin.. M Eo )e)ber of an 0&chan!e shall# directl" or indirectl"
endorse or !%arantee the perfor)ance of an" p%t# call# straddle# option or pri$ile!e in relation to an"
sec%rit" re!istered on a sec%rities e&chan!e. The ter)s "p%t"# "call"# "straddle"# "option"# or "pri$ile!e"
shall not incl%de an" re!istered warrant# ri!ht or con$ertible sec%rit".
Section 26. Fraudulent Transactions. M +t shall be %nlawf%l for an" person# directl" or indirectl"# in
connection with the p%rchase or sale of an" sec%rities to-
(5.1. 0)plo" an" de$ice# sche)e# or artice to defra%d1
(5.(. Dbtain )one" or propert" b" )eans of an" %ntr%e state)ent of a )aterial fact of an" o)ission to
state a )aterial fact necessar" in order to )ake the state)ents )ade# in the li!ht of the circ%)stances
%nder which the" were )ade# not )isleadin!1 or
(5.*. 0n!a!e in an" act# transaction# practice or co%rse of b%siness which operates or wo%ld operate as a
fra%d or deceit %pon an" person.
Section 2#. "nsider?s 'uty to 'isclose 4hen Tradin.. M (7.1. +t shall be %nlawf%l for an insider to sell or
b%" a sec%rit" of the iss%er# while in possession of )aterial infor)ation with respect to the iss%er or the
sec%rit" that is not !enerall" a$ailable to the p%blic# %nless- (a) The insider pro$es that the infor)ation was
not !ained fro) s%ch relationship1 or (b) +f the other part" sellin! to or b%"in! fro) the insider (or his
a!ent) is identied# the insider pro$es- (+) that he disclosed the infor)ation to the other part"# or (ii) that
he had reason to belie$e that the other part" otherwise is also in possession of the infor)ation. A p%rchase
or sale of a sec%rit" of the iss%er )ade b" an insider dened in S%bsection *.8# or s%ch insiderNs spo%se or
relati$es b" a?nit" or consan!%init" within the second de!ree# le!iti)ate or co))on-law# shall be
pres%)ed to ha$e been e/ected while in possession of )aterial nonp%blic infor)ation if transacted after
s%ch infor)ation ca)e into e&istence b%t prior to disse)ination of s%ch infor)ation to the p%blic and the
lapse of a reasonable ti)e for )arket to absorb s%ch infor)ation- /ro%ided, howe%er# That this
pres%)ption shall be reb%tted %pon a showin! b" the p%rchaser or seller that he was aware of the )aterial
nonp%blic infor)ation at the ti)e of the p%rchase or sale.
(7.(. :or p%rposes of this Section# infor)ation is ")aterial nonp%blic" if- (a) +t has not been !enerall"
disclosed to the p%blic and wo%ld likel" a/ect the )arket price of the sec%rit" after bein! disse)inated to
the p%blic and the lapse of a reasonable ti)e for the )arket to absorb the infor)ation1 or (b) wo%ld be
considered b" a reasonable person i)portant %nder the circ%)stances in deter)inin! his co%rse of action
whether to b%"# sell or hold a sec%rit".
(7.*. +t shall be %nlawf%l for an" insider to co))%nicate )aterial nonp%blic infor)ation abo%t the iss%er or
the sec%rit" to an" person who# b" $irt%e of the co))%nication# beco)es an insider as dened in
S%bsection *.8# where the insider co))%nicatin! the infor)ation knows or has reason to belie$e that s%ch
person will likel" b%" or sell a sec%rit" of the iss%er whole in possession of s%ch infor)ation.
(7.,. (a) +t shall be %nlawf%l where a tender o/er has co))enced or is abo%t to co))ence for-
(i) An" person (other than the tender o/eror) who is in possession of )aterial nonp%blic infor)ation
relatin! to s%ch tender o/er# to b%" or sell the sec%rities of the iss%er that are so%!ht or to be
so%!ht b" s%ch tender o/er if s%ch person knows or has reason to belie$e that the infor)ation is
nonp%blic and has been ac.%ired directl" or indirectl" fro) the tender o/eror# those actin! on its
behalf# the iss%er of the sec%rities so%!ht or to be so%!ht b" s%ch tender o/er# or an" insider of
s%ch iss%er1 and
(ii) An" tender o/eror# those actin! on its behalf# the iss%er of the sec%rities so%!ht or to be so%!ht
b" s%ch tender o/er# and an" insider of s%ch iss%er to co))%nicate )aterial nonp%blic infor)ation
relatin! to the tender o/er to an" other person where s%ch co))%nication is likel" to res%lt in a
$iolation of S%bsection (7., (a)(+).
(b) :or p%rposes of this s%bsection the ter) "sec%rities of the iss%er so%!ht or to be so%!ht b" s%ch tender
o/er" shall incl%de an" sec%rities con$ertible or e&chan!eable into s%ch sec%rities or an" options or ri!hts
in an" of the fore!oin! sec%rities.
CHAPTER VIII
REG(LATION OF SEC(RITIES MAR+ET PROFESSIONALS
GSV-,7
Section 28. Re.istration of 5rokers, 'ealers, 1alesmen and !ssociated /ersons. M (8.1. Eo person shall
en!a!e in the b%siness of b%"in! or sellin! sec%rities in the Philippine as a broker or dealer# or act as a
sales)an# or an associated person of an" broker or dealer %nless re!istered as s%ch with the Co))ission.
(8.(. Eo re!istered broker or dealer shall e)plo" an" sales)an or an" associated person# and no iss%er
shall e)plo" an" sales)an# who is not re!istered as s%ch with the Co))ission.
(8.*. The Co))ission# b" r%le or order# )a" conditionall" or %nconditionall" e&e)pt fro) s%bsection (8.1
and (8.( an" broker# dealer# sales)an# associated person of an" broker or dealer# or an" class of the
fore!oin!# as it dee)s consistent with the p%blic interest and the protection of in$estors.
(8.,. The Co))ission shall pro)%l!ate r%les and re!%lation prescribin! the .%alications for re!istration
of each cate!or" of applicant# which shall# a)on! other thin!s# re.%ire as a condition for re!istration that-
(a) +f a nat%ral person# the applicant satisfactoril" pass a written e&a)ination as to his procienc"
and knowled!e in the area of acti$it" for which re!istration is so%!ht1
(b) +n the case of a broker or dealer# the applicant satisf" a )ini)%) net capital as prescribed b"
the Co))ission# and pro$ide a bond or other sec%rit" as the Co))ission )a" prescribe to sec%re
co)pliance with the pro$isions of this Code1 and
(c) +f located o%tside of the Philippines# the applicant les a written consent to ser$ice of process
%pon the Co))ission p%rs%ant to Section 52 hereof.
(8.2. A broker or dealer )a" appl" for re!istration b" lin! with the Co))ission a written application in
s%ch for)s and containin! s%ch infor)ation and doc%)ents concernin! s%ch broker or dealer as the
Co))ission b" r%le shall prescribe.
(8.5. =e!istration of a sales)an or of an associated person of a re!istered broker or dealer )a" be )ade
%pon written application led with the Co))ission b" s%ch sales)an or associated person. The application
shall be separatel" si!ned and certied b" the re!istered broker or dealer to which s%ch sales)an or
associated person is to beco)e a?liated# or b" the iss%er in the case of a sales)an e)plo"ed appointed
or a%thori'ed solel" b" s%ch iss%er. The application shall be in s%ch for) and contain s%ch infor)ation and
doc%)ents concernin! the sales)an or associated person as the Co))ission b" r%le shall prescribe. :or
p%rposes of this Section# a sales)an shall not incl%de an" e)plo"ee of an iss%er whose co)pensation is
not deter)ined directl" or indirectl" on sales of sec%rities if the iss%er.
(8.7. Applications led p%rs%ant to S%bsections (8.2 and (8.5 shall be acco)panied b" a re!istration fee
in s%ch reasonable a)o%nt prescribed b" the Co))ission.
(8.8. 4ithin thirt" (*3) da"s after the lin! of an" application %nder this Section# the Co))ission shall b"
order- (a) Grant re!istrations if it deter)ines that the re.%ire)ents of this Section and the .%alications for
re!istrations set forth in its r%les and re!%lations ha$e been satised 1 or (b) 9en" said re!istration.
(8.A. The na)es and addresses of all persons appro$ed for the re!istration as brokers# dealers# associated
persons or sales)an and all orders of the Co))ission with respect thereto shall be recorded in a =e!ister
of Sec%rities 6arket Professionals kept in the o?ce of the Co))ission which shall be open to p%blic
inspection.
(8.13. 0$er" person re!istered p%rs%ant to this Section shall le with the Co))ission# in s%ch for) as the
Co))ission shall prescribe# infor)ation necessar" to keep the application for re!istration c%rrent and
acc%rate# incl%din! in the case of a broker or dealer chan!es in sales)en# associated persons and owners
thereof.
(8.11. 0$er" person re!istered p%rs%ant to this Selection shall pa" to the Co))ission an ann%al fee at
s%ch ti)e and in s%ch reasonable a)o%nt as the Co))ission shall prescribe. Bpon notice b" the
Co))ission that s%ch ann%al fee has not been paid as re.%ired# the re!istration of s%ch person shall be
s%spended %ntil pa")ent has been )ade.
(8.1(. The re!istration of a sales)an or associated person shall be a%to)aticall" ter)inated %pon the
cessation of his a?liation with said re!istered broker or dealer or with an iss%er in the case of a sales)an
e)plo"ed# appointed or a%thori'ed b" s%ch iss%er. Pro)ptl" followin! an" s%ch cessation of a?liation# the
re!istered broker or dealer# iss%er as the case )a" be# shall le with the Co))ission a notice of separation
of s%ch sales)an or associated person.
Section 2$. Re%ocation, Refusal or 1uspension of Re.istration of 5rokers, 'ealers, 1alesmen and
!ssociated /ersons. M (A.1. =e!istration %nder Section (8 of this Code )a" be ref%sed # or an" re!istration
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!ranted there%nder )a" be re$oked# s%spended# or li)itations placed thereon# b" the Co))ission if# after
d%e notice and hearin! the Co))ission deter)ines the application or re!istrant.
(a) Jas willf%ll" $iolated an" pro$ision of this Code# an" r%le# re!%lation or order )ade here%nder#
or an" other law ad)inistered b" the Co))ission# or in the case of a re!istered broker# dealer or
associated persons has failed to s%per$ise# with a $iew to pre$entin! s%ch $iolation# another person
who co))its s%ch $iolation1
(b) Jas willf%ll" )ade or ca%sed to be )ade a )ateriall" false or )isleadin! state)ent in an"
application for re!istration or report led with the Co))ission or a self-re!%lator" or!ani'ation# or
has willf%ll" o)itted to state an" )aterial fact that is re.%ired to be stated therein1
(c) Jas failed to satisf" the .%alications or re.%ire)ents for re!istration prescribed %nder Section
(8 and the r%les and re!%lations of the Co))ission pro)%l!ated there%nder1
(d) Jas been con$icted# b" a co)petent <%dicial or ad)inistrati$e bod" of an o/ense in$ol$in!
)oral t%rpit%de# fra%d# e)be''le)ent# co%nterfeitin!# theft# estafa# )isappropriation# for!er"#
briber"# false oath# or per<%r"# or of a $iolation of sec%rities# co))odities# bankin!# real state or
ins%rance laws1
(e) +s en<oined or restrained b" a co)petent <%dicial or ad)inistrati$e bod" fro) en!a!in! in
sec%rities# co))odities# bankin!# real state or ins%rance acti$ities or fro) willf%ll" $iolatin! laws
!o$ernin! s%ch acti$ities1
(f) +s s%b<ect to an order of a co)petent <%dicial or ad)inistrati$e bod" ref%sin!# re$okin! or
s%spendin! an" re!istration# licensed or other per)it %nder this Code# the r%les and re!%lations
pro)%l!ated there%nder# an" other law ad)inistered b" the Co))ission1
(!) +s s%b<ect to an order of a self-re!%lator" or!ani'ation s%spendin! or e&pellin! hi) fro)
)e)bership or participatin! therein or fro) association with a )e)ber or participant thereof1
(h) Jas been fo%nd b" a co)petent <%dicial or ad)inistrati$e bod" to ha$e willf%ll" $iolated an"
pro$isions of sec%rities# co))odities# bankin!# real state or ins%rance laws# or has willf%ll" aided#
abetted# co%nseled# co))anded# ind%ced or proc%red s%ch $iolation1 or
(i) Jas been <%diciall" declared insol$ent.
:or p%rposes of this s%bsection# the ter) "co)petent <%dicial or ad)inistrati$e bod"" shall incl%de a
forei!n co%rt of co)petent <%risdiction and a forei!n nancial re!%lator.
(A.(. (a) +n case of char!es a!ainst a sales)an or associated person# notice thereof shall also be !i$en the
broker# dealer or iss%er e)plo"in! s%ch sales)an or associated person.
(b) Pendin! the hearin!# the Co))ission shall ha$e the power to order the s%spensions of s%ch
brokerNs# dealers# associated personNs or sales)anNs re!istration- /ro%ided# That s%ch order shall
state the ca%se for s%ch s%spension. Bntil the entr" of a nal order# the s%spension of s%ch
re!istration# tho%!h bindin! %pon the persons notied thereof# shall be dee)ed condential# and
shall not be p%blished# %nless it shall appear that the order of s%spension has been $iolated after
notice.
(A.*. The orders of the Co))ission ref%sin!# re$okin!# s%spendin! or placin! li)itations on a re!istration
as herein abo$e pro$ided# to!ether with its ndin!s# shall be entered in the =e!ister of Sec%rities 6arket
Professionals. The s%spension or re$ocation of the re!istration of a dealer or broker shall also a%to)aticall"
s%spend the re!istration of all sales)en and associated persons a?liated with s%ch broker or dealer. The
order of the Co))ission ref%sin!# re$okin!# s%spendin! or placin! li)itations on a re!istration as herein
abo$e pro$ided# to!ether with its ndin!s# shall be entered in the =e!ister of Sec%rities 6arket
Professionals. The s%spension or re$ocation of the re!istration of a dealer or broker shall also a%to)aticall"
s%spend the re!istration of a dealer or broker shall also a%to)aticall" s%spend the re!istration of all
sales)en and associated persons a?liated with s%ch broker or dealer.
(A.,. +t shall be s%?cient ca%se for ref%sal# re$ocation or s%spension of a brokerNs or dealerNs re!istrations#
if an" associated person thereof or an" <%ridical entit" controlled b" s%ch associated person has co))itted
an" act or o)ission or is s%b<ect to an" disabilit" en%)erated in para!raphs (a) thro%!h (i) of S%bsection
(A. + hereof.
Section &. Transactions and Responsibility of 5rokers and 'ealers. M *3.1 Eo brokers or dealer shall deal
in or otherwise b%" or sell# for its own acco%nt or for its own acco%nt or for the acco%nt of c%sto)ers#
sec%rities listed on an 0&chan!e iss%ed b" an" corporation where an" stockholders# director# associated
GSV-,A
person or sales)an# or a%thori'ed clerk of said broker or dealer and all the relati$es of the fore!oin! within
the fo%rth ci$il de!ree of consan!%init" or a?nit"# is at the sa)e ti)e holdin! o?ce in said iss%er
corporation as a director# president# $ice-president# )ana!er# treas%rer# co)ptroller# secretar" or an"
o?ce tr%st and responsibilit"# or is a controllin! of the iss%er.
*3.(. Eo broker or dealer shall e/ect an" transaction in sec%rities or ind%ce or atte)pt to ind%ce the
p%rchase or sale of an" sec%rit" e&cept in co)pliance with s%ch r%les and re!%lations as the Co))ission
shall prescribe to ens%re fair and honest dealin!s in sec%rities and pro$ide nancial safe!%ards and other
standards for the operations of brokers and dealers# incl%din! the establish)ents of )ini)%) net capital
re.%ire)ents# the acceptance of c%stod" and %se of sec%rities of c%sto)ers# and the carr"in! and %se of
deposits and credit balances of c%sto)ers.
Section 1. 'e%elopment of 1ecurities arket /rofessionals. M The Co))ission in <oint %ndertakin! with
self re!%lator" or!ani'ations# or!ani'ations and associations of nance professionals as well as pri$ate
ed%cational and research instit%te shall %ndertake or facilitate@or!ani'e contin%in! trainin!#
conferences@se)inars# %pdatin! pro!ra)s# research and de$elop)ents as well as technolo!" transfer at
the latest and ad$ance trends in iss%ance and tradin! of sec%rities# deri$ati$es# co))odit" trades and
other nancial instr%)ents# as well as sec%rities )arkets of other co%ntries.
CHAPTER I,
E,CHANGES AND OTHER SEC(RITIES TRADING MAR+ETS
Section 2. /rohibition on @se of @nre.istered (&chan.e0 Re.ulation of 7%er*the*Counter arkets. M*(.1.
Eo broker# dealer# sales)an# associated person of a broker or dealer# or 0&chan!e# directl" or indirectl"
shall )ake %se of an" facilit" of an 0&chan!e in the Philippines to e/ect an" transaction in a sec%rit"# or to
report s%ch transaction# %nless s%ch 0&chan!e is re!istered as s%ch %nder Section ** of this Code.
*(.(. (a) Eo broker# dealer# sales)an or associated person of a broker or dealer# sin!l" or in concert with
an" other person# shall )ake# create or operate# or enable another to )ake# create or operate# an" tradin!
)arket# otherwise than on a re!istered 0&chan!e# for the b%"in! and sellin! of an" sec%rit"# e&cept in
accordance with r%les and re!%lations the Co))ission )a" prescribe.
(b) The Co))ission )a" pro)%l!ate r%les and re!%lations !o$ernin! transactions b" brokers#
dealers# sales)en or associated persons of a broker or dealer# o$er an" facilities of s%ch tradin!
)arket and )a" re.%ire s%ch )arket to be ad)inistered b" a self-re!%lator" or!ani'ation
deter)ined b" the Co))ission as capable of ins%rin! the protection of in$estors co)parable to
that pro$ided in the case of a re!istered 0&chan!e. S%ch self-re!%lator" or!ani'ation )%st pro$ide a
centrali'ed )arketplace for tradin! and )%st satisf" re.%ire)ents co)parable to those prescribed
for re!istration of 0&chan!es in Section ** of this Code.
Section . Re.istration of (&chan.es. M **.1. An" 0&chan!e )a" be re!istered as s%ch with the
Co))ission %nder the ter)s and conditions hereinafter pro$ided in this Section and Section ,3 hereof# b"
lin! an application for re!istration in s%ch for) and containin! s%ch infor)ation and s%pportin!
doc%)ents as the Co))ission b" r%le shall prescribe# incl%din! the followin!-
(a) An %ndertakin! to co)pl" and enforce b" its )e)bers with the pro$isions of this Code# its
i)ple)entin! r%les and re!%lations and the r%les of the 0&chan!e1
(b) The or!ani'ational charts of the 0&chan!e# r%les of proced%re# and a list of its o?cers and
)e)bers1
(c) Copies of the r%les of the 0&chan!e1 and
(d) An %ndertakin! that in the e$ent a )e)ber r) beco)es insol$ent or when the 0&chan!e shall
ha$e fo%nd that the nancial condition of its )e)ber r) has so deteriorated that it cannot readil"
)eet the de)ands of its c%sto)ers for the deli$er" of sec%rities and@or pa")ent of sales proceeds#
the 0&chan!e shall# %pon order of the Co))ission# take o$er the operation of the insol$ent )e)ber
r) and i))ediatel" proceed to settle the )e)ber r)Ns liabilities to its c%sto)ers.
**.(. =e!istrations of an 0&chan!e shall be !ranted %pon co)pliance with the followin! pro$isions-
(a) That the applicant is or!ani'ed as a stock corporation- /ro%ided# That an" re!istered 0&chan!e
e&istin! prior to the e/ecti$it" of this Code shall within one (1) "ear reor!ani'e as a stock
corporation p%rs%ant to a de)%t%ali'ation plan appro$ed b" the Co))ission1
(b) That the applicant is en!a!ed solel" in the b%siness of operatin! an e&chan!e- /ro%ided,
howe%er# That the Co))ission )a" adopt r%les# re!%lations or iss%e an order# %pon application#
GSV-23
e&e)ptin! an 0&chan!e or!ani'ed as a stock corporation and owned and controlled b" another
<%ridical person fro) the restriction.
(c) 4here the 0&chan!e is or!ani'ed as a stock corporation# that no person )a" beneciall" own or
control# directl" or indirectl"# )ore than $e percent (2>) of the $otin! ri!hts of the 0&chan!e and
no ind%str" or b%siness !ro%p )a" beneciall" own or control# directl" or indirectl"# )ore than
twent" percent ((3>) of the $otin! ri!hts of the 0&chan!e- /ro%ided, howe%er, That the Co))ission
)a" adopt r%les# re!%lations or iss%e an order# %pon application fro) this prohibition where it nds
that s%ch ownership or control will not ne!ati$el" i)pact on the e&chan!eNs abilit" to e/ecti$el"
operate in the p%blic interest.
(d) The e&p%lsion# s%spension# or disciplinin! of a )e)ber and persons associated with a )e)ber
for cond%ct or proceedin! inconsistent with <%st and e.%itable principles of fair trade# and for
$iolations of pro$isions of this Code# or an" other Act ad)inistered b" the Co))ission# the r%les#
re!%lations and orders there%nder# or the r%les of the 0&chan!e1N
(e) A fair proced%re for the disciplinin! of )e)bers and persons associated with )e)bers# the
denial of )e)bership to an" person seekin! to be a )e)ber# the barrin! of an" person fro)
association with a )e)ber# and the prohibition or li)itation of an" person fro) association with
)e)ber# and the prohibition or li)itation of an" person fro) access to ser$ices o/ered b" the
0&chan!e1
(f) That the brokers in the board of the 0&chan!e shall co)prise of not )ore than fort"-nine percent
(,A>) of s%ch board and shall proportionatel" represent the 0&chan!e )e)bership in ter)s of
$ol%)e@$al%e or trade and paid %p capital# and that an" nat%ral person associated with a <%ridical
entit" that is a )e)ber for this p%rpose1 /ro%ide, That an" re!istered 0&chan!e e&istin! prior to the
a/ecti$it" of this Code shall i))ediatel" co)pl" with this re.%ire)ent1
(!) :or the board of the 0&chan!e to incl%de in its co)position (1) the president of the 0&chan!e#
and (ii) no less than ft" one percent (21>) of the re)ainin! )e)bers of the board to be co)prised
of three (*) independent directors and persons who represent the interests of iss%ers# in$estors#
and other )arket participants# who are not associated with an" broker or dealer or )e)ber of the
0&chan!e for a period of two (() "ears prior to his@her appoint)ent. Eo o?cer or e)plo"ee of a
)e)ber# its s%bsidiaries or a?liates or related interests shall beco)e an independent director8
/ro%ided# howe%er, That the Co))ission )a" b" r%le# re!%lation# or order %pon application# per)it
the e&chan!e or!ani'ed as a stock corporation to %se a di/erent !o$ernance str%ct%re- /ro%ided,
further# That the Co))ission is satised that the 0&chan!e is actin! in the p%blic interest and is
able to e/ecti$el" operate as a self-re!%lator" or!ani'ation %nder this Code- /ro%ided, fnally, That
an" re!istered e&chan!e e&istin! prior to the a/ecti$it" of this Code shall i))ediatel" co)pl" with
this re.%ire)ent.
(h) The president and other )ana!e)ent of the 0&chan!e to consist onl" of persons who are not
)e)bers and are not associated in an" capacit"# directl" or indirectl" with an" broker or dealer or
)e)ber or listed co)pan" of the 0&chan!e- /ro%ided# That the 0&chan!e )a" onl" appoint# and a
person )a" onl" ser$e# as an o?cer of the e&chan!e if s%ch person has not been a )e)ber or
a?liated with an" broker# dealer# or )e)ber of the 0&chan!e for a period of at least two (() "ears
prior to s%ch appoint)ent1
(i) The transparenc" of transactions on the 0&chan!e1
(<) The e.%itable allocation of reasonable d%es# fees# and other char!es a)on! )e)bers and
iss%ers and other persons %sin! an" facilit" or s"ste) which the 0&chan!e operates or controls1
(k) Pre$ention of fra%d%lent and )anip%lati$e acts and practices# pro)otion of <%st and e.%itable
principles of trade# and# in !eneral# protection of in$estors and the p%blic interest1 and
(l) The transparent# pro)pt and acc%rate clearance and settle)ent of transactions e/ected on the
0&chan!e.
**.*. +f the Co))ission nds that the applicant 0&chan!e is capable of co)pl"in! and enforcin!
co)pliance b" its )e)bers# and persons associated with s%ch )e)bers# with the pro$isions of this Code#
and the r%les of the 0&chan!e# and that the r%les of 0&chan!e are fair# <%st and ade.%ate# the Co))ission
shall ca%se s%ch 0&chan!e to be re!istered. +f# after notice d%e and hearin!# the Co))ission nds
otherwise# the application shall be denied.
**.,. 4ithin ninet" (A3) da"s after the lin! of the application the Co))ission )a" iss%e an order either
!rantin! or den"in! re!istration as an 0&chan!e# %nless the 0&chan!e appl"in! for re!istration shall
withdraw its application or shall consent to the Co))issionNs deferrin! action on its application for a
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stated lon!er period after the date of lin!. The lin! with the Co))ission of an application for re!istration
b" an 0&chan!e shall be dee)ed to ha$e taken place %pon the receipt thereof. A)end)ents to an
application )a" be )ade %pon s%ch ter)s as the Co))ission )a" prescribe.
**.2. Bpon the re!istration of an 0&chan!e# it is shall pa" a fee in s%ch a)o%nt and within s%ch period as
the Co))ission )a" &.
**.5. Bpon appropriate application in accordance with the r%les and re!%lations of the Co))ission and
%pon s%ch ter)s as the Co))ission )a" dee)ed necessar" for the protection of in$estors# an e&chan!e
)a" withdraw its re!istration or s%spend its operations or res%)e the sa)e.
Section !. 1e.re.ation and -imitation of functions of embers, 5roker and 'ealers. * *,.1. +t shall be
%nlawf%l for an" )e)ber-broker of an 0&chan!e to e/ect an" transaction on s%ch 0&chan!e for its own
acco%nt# the acco%nt of an associated person# or an acco%nt with the respect to which it or an associated
person thereof e&ercises the in$est)ent discretion- /ro%ided, howe%er, That this Section shall not )ake
%nlawf%l-
(a) An" transaction b" a )e)ber-broker actin! in the capacit" of a )arket )aker1
(b) An" transaction reasonabl" necessar" to carr" on an odd-lot transactions1
(c) An" transaction to o/set a transaction )ade in error1 and
(d) An" other transaction of a si)ilar nat%re as )a" be dened b" the Co))ission.
*,.(. +n all instances where the )e)ber-broker e/ects a transaction on an 0&chan!e for its own acco%nt or
the acco%nt of an associated person or an acco%nt with the respect to which it e&ercises in$est)ent
discretion# it shall disclose to s%ch c%sto)er at or before the co)pletion of the transaction it is actin! for
its own acco%nt- /ro%ided, further, That this fact shall be reLected in the order ticket and the conr)ation
slip.
*,.*. An" )e)ber-broker who $iolates the pro$isions of this Section shall be s%b<ect to the ad)inistrati$e
sanctions pro$ided in Section 2, of this Code.
Section ". !dditional Fees of (&chan.es. M +n addition to the re!istration fee prescribed in Section ** of
this Code# e$er" 0&chan!e shall pa" to the Co))ission# on a se)estral basis on or before the tenth da" of
the end of the end of e$er" se)ester of the calendar "ear# a fee in s%ch an a)o%nt as the Co))ission
shall prescribe# b%t not )ore than one-h%ndredth of one per centum (1>) of the a!!re!ate a)o%nt of the
sales of sec%rities transacted on s%ch 0&chan!e d%rin! the precedin! calendar "ear for the pri$ile!e of
doin! b%siness# d%rin! the precedin! calendar "ear or an" part thereof.
Section 6. /owers with Respect to (&chan.es and 7ther Tradin. arket. M *5.1. The Co))ission is
a%thori'ed# if in its opinion s%ch action is necessar" or appropriate for the protection of in$estors and the
p%blic interest so re.%ires# s%))aril" to s%spend tradin! in an" listed sec%rit" on an" 0&chan!e or other
tradin! )arket for a period not e&ceedin! thirt" (*3) da"s b%t not e&ceedin! ninet" (A3) da"s- /ro%ided,
howe%er# That the Co))ission pro)ptl" followin! the iss%ance of the order of s%spension# shall notif" the
a/ected iss%er of the reasons for s%ch s%spension and pro$ide s%ch iss%er with an opport%nit" for hearin!
to deter)ine whether the s%spension sho%ld be lifted.
*5.(. 4here$er two (() or )ore 0&chan!es or other tradin! )arkets e&ist# the Co))ission )a" re.%ire
and enforce %nifor)it" of tradin! re!%lations in and@or between or a)on! said 0&chan!es or other tradin!
)arkets.
*5.*. +n addition to the e&istin! Philippine Stock 0&chan!e# the Co))ission shall ha$e the a%thorit" to
deter)ine the n%)ber# si'e and location of stock 0&chan!es# other tradin! )arkets and co))odit"
0&chan!es and other si)ilar or!ani'ations in the li!ht of national or re!ional re.%ire)ents for s%ch
acti$ities with the $iew to pro)ote# enhance# protect# conser$e or rationali'e in$est)ent.
*5.,. The Co))ission# ha$in! d%e re!ard to the p%blic interest# the protection of in$estors# the
safe!%ardin! of sec%rities and f%nds# and )aintenance of fair co)petition a)on! brokers# dealers# clearin!
a!encies# and transfer a!ents# shall pro)%l!ate r%les and re!%lations for the pro)pt and acc%rate
clearance and settle)ent of sec%rities transactions.
*5.2. (a) The Co))ission )a" establish or facilitate the establish)ent of tr%st f%nds which shall be
contrib%ted b" 0&chan!es# brokers# dealers# %nderwriters# transfer a!ents# sales)en and other persons
transactin! in sec%rities# as the Co))ission )a" re.%ire# for the p%rpose of co)pensatin! in$estors for
the e&traordinar" losses or da)a!e the" )a" s%/er d%e to b%siness fail%re or fra%d or )is)ana!e)ent of
GSV-2(
the persons with who) the" transact# %nder s%ch r%les and re!%lations as the Co))ission )a" fro) ti)e
to ti)e prescribe or appro$e in the p%blic interest.
(b) The Co))ission )a"# ha$in! d%e re!ard to the p%blic interest or the protection of in$estors#
re!%late# s%per$ise# e&a)ine# s%spend or otherwise discontin%e s%ch and other si)ilar f%nds %nder
s%ch r%les and re!%lations which the Co))ission )a" pro)%l!ate# and which )a" incl%de takin!
c%stod" and )ana!e)ent of the f%nd itself as well as in$est)ents in and disb%rse)ents fro) the
f%nds %nder s%ch for)s of control and s%per$ision b" the Co))ission as it )a" fro) ti)e to ti)e
re.%ire. The a%thorit" !ranted to the Co))ission %nder this s%bsection shall also appl" to all f%nds
established for the protection of in$estors# whether established b" the Co))ission or otherwise.
Section #. Re.istration of "nno%ati%e and 7ther Tradin. arkets. M The Co))ission# ha$in! d%e re!ard
for national econo)ic de$elop)ent# shall enco%ra!e co)petiti$eness in the )arket b" pro)%l!atin! within
si& (5) )onths %pon the enact)ent of this Code# r%les for the re!istration and licensin! of inno$ati$e and
other tradin! )arkets or 0&chan!es co$erin!# b%t not li)ited to# the iss%ance and tradin! of inno$ati$e
sec%rities# sec%rities of s)all# )edi%)# !rowth and $ent%re enterprises# and technolo!"-based $ent%res
p%rs%ant to Section ** of this Code.
Section 8. "ndependent 'irectors. M An" corporation with a class of e.%it" sec%rities listed for tradin! on
an 0&chan!e or with assets in e&cess of :ift" )illion pesos (P23#333#333.33) and ha$in! two h%ndred ((33)
or )ore holders# at least of two h%ndred ((33) of which are holdin! at least one h%ndred (133) shares of a
class of its e.%it" sec%rities or which has sold a class of e.%it" sec%rities to the p%blic p%rs%ant to an
e/ecti$e re!istration state)ent in co)pliance with Section 1( hereof shall ha$e at least two (()
independent directors or s%ch independent directors shall constit%te at least twent" percent ((3>) of the
)e)bers of s%ch board whiche$er is the lesser. :or this p%rpose# an "independent director" shall )ean a
person other than an o?cer or e)plo"ee of the corporation# its parent or s%bsidiaries# or an" other
indi$id%al ha$in! a relationship with the corporation# which wo%ld interfere with the e&ercise of
independent <%d!e)ent in carr"in! o%t the responsibilities of a director.
CHAPTER ,
REGISTRATION. RESPONSIBILITIES AND OVERSIGHT OF SELF-REG(LATOR* ORGANI%ATIONS
Section $. !ssociations of 1ecurities 5rokers, and 'ealers, and 7ther 1ecurities Related 7r.ani9ations. M
*A.1. The Co))ission shall ha$e the power to re!ister as a self-re!%lator" or!ani'ation# or otherwise !rant
licenses# and to re!%late# s%per$ise# e&a)ine# s%spend or otherwise discontin%e# as a condition for the
operation of or!ani'ations whose operations are related to or connected with the sec%rities )arket s%ch as
b%t not li)ited to associations of brokers and dealers# transfer a!ents# c%stodians# scal and pa"in!
a!ents# co)p%ter ser$ices# news disse)inatin! ser$ices# pro&" solicitors# statistical a!encies# sec%rities
ratin! a!encies# and sec%rities infor)ation processor which are en!a!ed in b%siness of- (a) Collectin!#
processin!# or preparin! for distrib%tion or p%blication# or assistin!# participatin! in# or coordinatin! the
distrib%tion or p%blication of# infor)ation with respect to transactions in or .%otations for an" sec%rit"1 or
(b) 9istrib%tin! or p%blishin!# whether b" )eans of a ticker tape# a co))%nications network# a ter)inal
displa" de$ice# or otherwise# on a c%rrent and contin%in! basis# infor)ation with respect to s%ch
transactions or .%otations. The Co))ission )a" prescribe r%les and re!%lations which are necessar" or
appropriate in the p%blic interest or for the protection of in$estors to !o$ern self-re!%lator" or!ani'ations
and other or!ani'ations licensed or re!%lated p%rs%ant to the a%thorit" !ranted in S%bsection *A.1
incl%din! the re.%ire)ent of cooperation within and a)on!# and electronic inte!ration of the records of# all
participants in the sec%rities )arket to ens%re transparenc" and facilitate e&chan!e of infor)ation.
*A.(. An association of brokers and dealers )a" be re!istered as a sec%rities association p%rs%ant to
S%bsection *A.* b" lin! with the Co))ission an application for re!istration in s%ch for) as the
Co))ission# b" r%le# )a" prescribe containin! the r%les of the association and s%ch other infor)ation and
doc%)ents as the Co))ission# b" r%le# )a" prescribe as necessar" or appropriate in the p%blic interest or
*A.*. An association of brokers and dealers shall not be re!istered as a sec%rities association %nless the
Co))ission deter)ines that-
(a) The association is so or!ani'ed and has the capacit" to be able to carr" o%t the p%rposes of this
Code and to co)pl" with# and to enforce co)pliance b" its )e)bers and persons associated with
its )e)bers# with the pro$isions of this Code# the r%les and re!%lations there%nder# and the r%les of
the association.
(b) The r%les of the association# notwithstandin! an"thin! in the Corporation Code to the contrar"#
pro$ide that-
(i) An" re!istered broker or dealer )a" beco)e a )e)ber of the association1
GSV-2*
(ii) There e&ist a fair representation of its )e)bers to ser$e on the Hoard of 9irectors of the
association and in the ad)inistration of its a/airs# and that )a" an" nat%ral person
associated with a <%ridical entit" that is a )e)ber shall hi)self be dee)ed to be a )e)ber
for this p%rpose1
(iii) The Hoard of 9irectors of the association incl%des in its co)position-
(a) The president of the association and
(b) Person who represent the interests of the iss%er and p%blic in$estors and are not
associated with an" broker or dealer or )e)ber of the association1 that the president
and other )ana!e)ent of the association not be a )e)ber or associated with an"
broker# dealer or )e)ber of the association1
(i$) :or the e.%itable allocation of reasonable d%es# fees# and other char!es a)on! )e)ber
and iss%ers and other persons %sin! an" facilit" or s"ste) which the association operates or
controls1
($) :or the pre$ention of fra%d%lent and )anip%lati$e acts and practices# the pro)otion of
<%st and e.%itable principles of trade# and# in !eneral# the protection of in$estors and the
p%blic interest1
($i) That its )e)bers and persons associated with its )e)bers shall be appropriatel"
disciplined for $iolation of an" pro$ision of this Code# the r%les and re!%lations there%nder#
or the r%les of the association1
($ii) That a fair proced%re for the disciplinin! of )e)bers and persons associated with
)e)bers# the denial of )e)bership to an" person seekin! )e)bership therein# the barrin!
of an" person fro) beco)in! associated with a )e)ber thereof# and the prohibition or
li)itation b" the association of an" person with respect to access to ser$ices o/ered b" the
association or a )e)ber thereof.
*A.,. (a) A re!istered sec%rities association shall den" )e)bership to an" person who is not a re!istered
broker or dealer.
(b) A re!istered sec%rities association )a" den" )e)bership to# or condition the )e)bership of# a
re!istered broker or dealer if s%ch broker or dealer-
(i) 9oes not )eet the standards of nancial responsibilit"# operational capabilit"# trainin!#
e&perience or co)petence that are prescribe b" the r%les of the association1 or
(ii) Jas en!a!ed# and there is a reasonable likelihood it will a!ain en!a!e# in acts or
practices inconsistent with <%st and e.%itable principles of fair trade.
(c) A re!istered sec%rities association )a" den" )e)bership to a re!istered broker or dealer not
en!a!e in a t"pe of b%siness in which the r%les of the association re.%ire )e)bers to be
en!a!ed-/ro%ided, howe%er, That no re!istered sec%rities association )a" den" )e)bership to a
re!istered broker or dealer b" reason of the a)o%nt of b%siness done b" the broker or dealer.
A re!istered sec%rities association )a" e&a)ine and $erif" the .%alications of an applicant to
beco)e a )e)ber in accordance with proced%re established b" the r%les of the association.
(d) A re!istered sec%rities association )a" bar a sales)an or person associated with a broker or
dealer fro) bein! e)plo"ed b" a )e)ber or set conditions for the e)plo")ent of a sales)an or
associated if s%ch person-
(i) 9oes not )eet the standards of trainin!# e&perience# or co)petence that are prescribe b"
the r%les of the association1 or
(ii) Jas en!a!e# and there is a reasonable likelihood he will a!ain en!a!e# in acts or
practices inconsistent with <%st and e.%itable principles of fair trade.
A re!istered sec%rities association )a" e&a)ine and $erif" the .%alications of an applicant to beco)e a
sales)an or associated person e)plo"ed b" a )e)ber in accordance with the proced%res establish b" the
r%les of the association. A re!istered association also )a" re.%ire a sales)an or associated person
e)plo"ed b" a )e)ber to be re!istered with the association in accordance with the proced%res prescribed
in the r%les of the association.
GSV-2,
*A.2. +n an" proceedin! b" a re!istered sec%rities association to deter)ine whether a person shall be
denied )e)bership# or barred fro) association with a )e)ber# the association shall pro$ide notice to the
person %nder re$iew of the specic !ro%nds bein! considered for denial# a/ord hi) an opport%nit" to
defend a!ainst the alle!ations# and keep a record of the proceedin!s. A deter)ination b" the association
to den" )e)bership shall be s%pported b" a state)ent settin! forth the specic !ro%nds on which the
denial is based.
Section !&. /owers with Respect to 1elf*Re.ulatory 7r.ani9ations. * ,3.1. Bpon the lin! of an application
for re!istration as an 0&chan!e %nder Section **# a re!istered sec%rities association %nder Section *A# a
re!istered clearin! a!enc" %nder Section ,(# or other self-re!%lator" or!ani'ation %nder this Section# the
Co))ission shall ha$e ninet" (A3) da"s within which to either !rant re!istration sho%ld be denied. +n the
e$ent proceedin!s are instit%ted# the Co))ission shall ha$e two h%ndred se$ent" ((73) da"s within which
to concl%de s%ch proceedin!s at which ti)e it shall# b" order# !rant or den" s%ch re!istration.
,3.(. 0$er" self-re!%lator" or!ani'ation shall co)pl" with the pro$ision of this Code# the r%les and
re!%lations there%nder# and its own r%les# and enforce co)pliance therewith# notwithstandin! an"
pro$isions of the Corporation Code to the contrar"# b" its )e)bers# persons associated with its )e)bers
of its participants.
,3.*. (a) 0ach self-re!%lator" or!ani'ation shall s%b)it to the Co))ission for prior appro$al an" proposed
r%le or a)end)ent thereto# to!ether with a concise state)ent of the reason and e/ect of the proposed
a)end)ent
(b) 4ithin si&t" (53) da"s after s%b)ission of a proposed a)end)ent# the Co))ission shall# b"
order# appro$e the proposed a)end)ent. Dtherwise# the sa)e )a" be )ade e/ecti$e b" the self-
re!%lator" or!ani'ation.
(c) +n the e$ent of an e)er!enc" re.%irin! action for the protection of in$estors# the )aintenance of
fair and orderl" )arkets# or the safe!%ardin! of sec%rities and f%nds# a self-re!%lator" or!ani'ation
)a" p%t a proposed a)end)ent into e/ect s%))aril"1 /ro%ided howe%er, That the cop" of the
sa)e shall be i))ediatel" s%b)itted to the Co))ission.
,3.,. The Co))ission is f%rther a%thori'ed# if after )akin! appropriate re.%est in writin! to a self-
re!%lator" or!ani'ation that s%ch or!ani'ation e/ect on its own behalf specied chan!es in its r%les and
practices and# after d%e to notice and hearin! it deter)ines that s%ch chan!es ha$e not been e/ected#
and that s%ch chan!es are not necessar"# b" the r%le or re!%lation or b" order# )a" alter# abro!ate or
s%pple)ent the r%les of s%ch self-re!%lator" or!ani'ation in so far as necessar" or appropriate to e/ect
s%ch chan!es in respect of s%ch )atters as-
(a) Safe!%ards in respect of the nancial responsibilit" of )e)bers and ade.%ate pro$ision a!ainst
the e$asion of nancial responsibilit" thro%!h the %se of corporate for)s or special partnerships1
(b) The s%per$ision of tradin! practices1
(c) The listin! or strikin! fro) listin! of an" sec%rit"1
(d) Jo%rs of tradin!1
(e) The )anner# )ethods# and place of solicitin! b%siness1
(f) :ictitio%s acco%nts1
(!) The ti)e and )ethod of )akin! settle)ents# pa")ents# and deli$eries# and of closin! acco%nts1
(h) The transparenc" of sec%rities transactions and prices1
(i) The &in! of reasonable rates of fees# interest# listin! and other char!es# b%t not rates of
co))ission1
(<) 6ini)%) %nits of tradin!1
(k) Ddd-lot p%rchases and sales1
(l) 6ini)%) deposits on )ar!in acco%nts1 and
()) The s%per$ision# a%ditin! and disciplinin! of )e)bers or participants.
GSV-22
,3.2. The Co))ission# after d%e notice and hearin!# is a%thori'ed# in the p%blic interest and to protect
in$estors-
(a) To s%spend for a period not e&ceedin! twel$e (1() )onths or to re$oke the re!istration of a self-
re!%lator" or!ani'ation# or to cens%re or i)pose li)itations on the acti$ities# f%nctions# and
operations of s%ch self-or!ani'ation# if the Co))ission nds that s%ch a self-re!%lator" or!ani'ation
has willf%ll" $iolated or is %nable to co)pl" with an" pro$ision of this Code or of the r%les and
re!%lations there%nder# or its own or has failed to enforce co)pliance therewith b" a )e)ber of#
person associated with a )e)ber# or a participant in s%ch self-re!%lator" or!ani'ation1
(b) To e&pel fro) a self-re!%lator" or!ani'ation an" )e)ber thereof or an" participant therein who
is s%b<ect to an order of the Co))ission %nder Section (A of this Code or is fo%nd to ha$e willf%ll"
$iolated an" pro$ision of this Code or s%spend for a period not e&ceedin! twel$e (1() )onths for
$iolation of an" pro$ision of this Code or an" other laws ad)inistered b" the Co))ission# or r%les
and re!%lations there%nder# or e/ected# directl" or indirectl"# an" transaction for an" person who#
s%ch )e)ber or participant had reason to belie$e# was $iolatin! in respect of s%ch transaction an"
of s%ch pro$isions1 and
(c) To re)o$e fro) the o?ce or cens%re an" o?cer or director of a self-re!%lator" or!ani'ation if it
nds that s%ch o?cer or director has $iolated an" pro$ision of this Code# an" other law
ad)inistered b" the Co))ission# the r%les or re!%lations there%nder# or the r%les of s%ch self-
re!%lator" or!ani'ation# ab%sed his a%thorit"# witho%t reasonable <%stication or e&c%se has failed
to enforce co)pliance with an" of s%ch pro$isions.
,3.5. (a) A self-re!%lator" or!ani'ation is a%thori'ed to discipline a )e)ber of or participant in s%ch self-
re!%lator" or!ani'ation# or an" person associated with a )e)ber# incl%din! the s%spension or e&p%lsion of
s%ch )e)ber or participant# and the s%spension or bar fro) bein! associated with a )e)ber# if s%ch
person has en!a!e in acts or practices inconsistent with <%st and e.%itable principles of fair trade or in
willf%l $iolation of an" pro$ision of the Code# an" other law ad)inistered b" the Co))ission# the r%les or
re!%lations there%nder# or the r%les of the self-re!%lator" or!ani'ation. +n an" disciplinar" proceedin! b" a
self-re!%lator" or!ani'ation (other than a s%))ar" proceedin! p%rs%ant to para!raph (b) of this
s%bsection) the self-re!%lator" or!ani'ation shall brin! specic char!es# pro$ide notice to the person
char!ed# a/ord the person char!ed with an opport%nit" to defend a!ainst the char!es# and keep a record
of the proceedin!s. A deter)ination to i)pose a disciplinar" sanction shall be s%pported b" a written
state)ent of the o/enses# a s%))ar" of the e$idence presented and a state)ent of the sanction i)posed.
(b) A self-re!%lator" or!ani'ation )a" s%))aril"- (+) S%spend a )e)ber# participant or person
associated with a )e)ber who has been or is e&pelled or s%spended fro) an" other self-re!%lator"
or!ani'ation1 or (ii) S%spend a )e)ber who the self-re!%lator" or!ani'ation nds to be in s%ch
nancial or operatin! di?c%lt" that the )e)ber or participant cannot be per)itted to contin%e to
do b%siness as a )e)ber with safet" to in$estors# creditors# other )e)bers# participants or the
self-re!%lator" or!ani'ation- /ro%ided, That the self-re!%lator" or!ani'ation i))ediatel" noties the
Co))ission of the action taken. An" person a!!rie$ed b" a s%))ar" action p%rs%ant to this
para!raph shall be pro)ptl" a/orded an opport%nit" for a hearin! b" the association in accordance
with the pro$isions of para!raph (a) of this s%bsection. The Co))ission# b" order# )a" sta" a
s%))ar" action on its own )otion or %pon application b" an" person a!!rie$ed thereb"# if the
Co))ission deter)ines s%))aril" or after d%e notice and hearin! (which hearin! )a" consist
solel" of the s%b)ission of a?da$its or presentation of oral ar!%)ents) that a sta" is consistent
with the p%blic interest and the protection of in$estors.
,3.7. A self-re!%lator" or!ani'ation shall pro)ptl" notif" the Co))ission of an" disciplinar" sanction on
an" )e)ber thereof or participant therein# an" denial of )e)bership or participation in s%ch or!ani'ation#
or the i)position of an" disciplinar" sanction on a person associated with a )e)ber or a bar of s%ch
person fro) beco)in! so associated. 4ithin thirt" (*3) da"s after s%ch notice# an" a!!rie$ed person )a"
appeal to the Co))ission fro)# or the Co))ission fro)# or the Co))ission on its own )otion within s%ch
period# )a" instit%te re$iew of# the decision of the self-re!%lator" or!ani'ation# at the concl%sion of which#
after d%e notice and hearin! (which )a" consist solel" of re$iew of the record before the self-re!%lator"
or!ani'ation)# the Co))ission shall a?r)# )odif" or set aside the sanction. +n s%ch proceedin! the
Co))ission shall deter)ine whether the a!!rie$ed person has en!a!ed or o)itted to en!a!e in the acts
and practices as fo%nd b" the self-re!%lator" or!ani'ation# whether s%ch acts and practices constit%te
willf%l $iolations of this Code# an" other law ad)inistered b" the Co))ission# the r%les or re!%lations
there%nder# or the r%les of the self-re!%lator" or!ani'ation as specied b" s%ch or!ani'ation# whether s%ch
pro$isions were applied in a )anner consistent with the p%rposes of this Code# and whether# with d%e
re!ard for the p%blic interest and the protection of in$estors the sanction is e&cessi$e or oppressi$e.
,3.8. The powers of the Co))ission %nder this Section shall appl" to or!ani'ed e&chan!es and re!istered
clearin! a!encies.
GSV-25
CHAPTER ,I
AC-(ISITION AND TRANSFER OF SEC(RITIES AND SETTLEMENT OF TRANSACTION IN
SEC(RITIES
Section !1. /rohibition on @se of @nre.istered Clearin. !.ency. M +t shall be %nlawf%l for an" broker#
dealer# sales)an# associated person of a broker or dealer# or clearin! a!enc"# directl" or indirectl"# to
)ake %se of an" facilit" of a clearin! a!enc" in Philippines to )ake deli$eries in connection with
transaction in sec%rities or to red%ce the n%)ber of settle)ents of sec%rities transactions or to allocate
sec%rities settle)ent responsibilities or to pro$ide for the central handlin! of sec%rities so that transfers#
loans and pled!es and si)ilar transaction can be )ade b" bookkeepin! entr" or otherwise to facilitate the
settle)ent of sec%rities transactions witho%t ph"sical deli$er" of sec%rities certicates# %nless s%ch
clearin! a!enc" is re!istered as s%ch %nder Section ,( of this Code or is e&e)pted fro) s%ch re!istration
%pon application b" the clearin! a!enc" beca%se# in the opinion of the Co))ission# b" reason of the
li)ited $ol%)e of transactions which are settled %sin! the clearin! a!enc"# it is not practicable and not
necessar" or appropriate in the p%blic interest or for the protection of in$estors to re.%ire s%ch
re!istration.
Section !2. Re.istration of Clearin. !.encies. - ,(.1. An" clearin! a!enc" )a" be re!istered as s%ch with
the Co))ission %nder the ter)s and conditions hereinafter pro$ided in this Section# b" lin! an
application for re!istration in s%ch for) and containin! s%ch infor)ation and s%pportin! doc%)ents as the
Co))ission b" r%le shall prescribe# incl%din! the followin!-
(a) An %ndertakin! to co)pl" and enforce co)pliance b" its participants with the pro$isions of this
Code# and an" a)end)ents thereto# and the i)ple)entin! r%les or re!%lations )ade or to be
)ade there%nder# and the clearin! a!enc"Ns r%les1
(b) The or!ani'ational charts of the 0&chan!e# its r%les of proced%re# and list of its o?cers and
participants1
(c) Copies of the clearin! a!enc"Ns r%les.
,(.(. Eo re!istration of a clearin! a!enc" shall be !ranted %nless the r%les of the clearin! a!enc" incl%de
pro$ision for-
(a) The e&p%lsions# s%spension# or disciplinin! of a participant for $iolations of this Code# or an"
other Act ad)inistered b" the Co))ission# the r%les# re!%lations# and orders there%nder# or the
clearin! a!enc"Ns r%les1
(b) A fair proced%re for the disciplinin! of participants# the denial of participation ri!hts to an"
person seekin! to be a participant# and the prohibition or li)itation of an" person fro) access to
ser$ices o/ered b" the clearin! a!enc"1
(c) The e.%itable allocation of reasonable d%es# fees# and other char!es a)on! participants1
(d) Pre$ention of fra%d%lent and )anip%lati$e acts and practices# pro)otion of <%st and e.%itable
principles of trade# and# in !eneral# protection of in$estors and the p%blic interest1
(e) The transparent# pro)pt and acc%rate clearance and settle)ent of transactions in sec%rities
handled b" the clearin! a!enc"1 and
(f) The establish)ent and o$ersi!ht of a f%nd to !%arantee the pro)pt and acc%rate clearance and
settle)ent of transaction e&ec%ted on an e&chan!e# incl%din! a re.%ire)ent that )e)bers each
contrib%te an a)o%nt based on their and a rele$ant percenta!e of the dail" e&pos%re of the (,)
lar!est tradin! brokers which ade.%atel" reLects tradin! risks %ndertaken or p%rs%ant to another
for)%la set forth in Co))ission r%les or re!%lations or order# %pon application- Pro$ided# howe$er#
That a clearin! a!enc" en!a!ed in the b%siness of sec%rities depositor" shall be e&e)pt fro) this
re.%ire)ent.
,(.*. +n the case of an application led p%rs%ant to this section# the Co))ission shall !rant re!istration if
it is nds That the re.%ire)ents of this code and the r%les and re!%lations there%nder with respect to the
applicant ha$e been satised# and shall den" re!istration if it does not )ake s%ch ndin!.
,(.,. Bpon appropriate application in accordance with the r%les and re!%lations of the Co))ission and
%pon s%ch ter)s as the Co))ission )a" dee) necessar" for the protection of in$estors# a clearin!
a!enc" )a" withdraw its re!istration or s%spend its operation or res%)e the sa)e.
GSV-27
Section !. @ncertifcated 1ecurities. M Eotwithstandin! Section 5* of the Corporation Code of the
Philippines- ,*.1. A corporation whose sec%rities are re!istered p%rs%ant to this Code or listed on sec%rities
e&chan!e )a"-
(a) +f so resol$ed b" its Hoard of 9irectors and a!reed b" a shareholder# in$estor or sec%rities
inter)ediar"# iss%e shares to# or record the transfer of so)e or all its shares into the na)e of said
shareholders# in$estors or# sec%rities inter)ediar" in the for) of %ncertied sec%rities. The %se of
%ncertied sec%rities in these circ%)stances shall be witho%t pre<%dice to the ri!hts of the
sec%rities inter)ediar" s%bse.%entl" to re.%ire the corporation to iss%e a certicate in respect of
an" shares recorded in its na)e1 and
(b) +f so pro$ided in its articles of incorporation and b"-laws# iss%e all of the shares of a partic%lar
class in the for) of Bncerticated sec%rities and s%b<ect to a condition that in$estors )a" not
re.%ire the corporation to iss%e a certicate in respect of an" shares recorded in their na)e.
,*.(. The Co))ission b" r%le )a" allow other corporations to pro$ide in their articles of incorporation and
b"-laws for the %se of %ncerticated sec%rities.
,*.*. Transfers of sec%rities# incl%din! an %ncerticated sec%rities# )a" be $alidl" )ade and cons%))ated
b" appropriate book-entries in the sec%rities inter)ediaries# or in the stock and transfer book held b" the
corporation or the stock transfer a!ent and s%ch bookkeepin! entries shall be bindin! on the parties to the
transfer. A transfer %nder this s%bsection has the e/ect of the deli$er" of a sec%rit" in bearer for) or d%l"
indorsed in blank representin! the .%antit" or a)o%nt of sec%rit" or ri!ht transferred# incl%din! the
%nrestricted ne!otiabilit" of that sec%rit" b" reason of s%ch deli$er". Jowe$er# transfer of %ncerticated
shares shall onl" be $alid# so far as the corporation is concerned# when a transfer is recorded in the books
of the corporation so as to show the na)es of the parties to the transfer and the n%)ber of shares
transferred.
Jowe$er# nothin! in this Code shall co)pliance b" bankin! and other instit%tions %nder the s%per$ision of
the Han!ko Sentral n! Pilipinas and their stockholders with the applicable ceilin!s on shareholdin!
prescribed %nder pertinent bankin! laws and re!%lations.
Section !!. (%identiary ,alue of Clearin. !.ency Record. M The o?cial records and book entries of a
clearin! a!enc" shall constit%te the best e$idence of s%ch transactions between clearin! a!enc" shall
constit%te the best between clearin! a!enc" and its participantsN or )e)bersN clients to pro$e their ri!hts#
title and entitle)ent with respect to the book-entr" sec%rit" holdin!s of the participants or )e)bers held
on behalf of the clients. Jowe$er# the corporation shall not be bo%nd b" the fore!oin! transactions %nless
the corporate secretar" is d%l" notied in s%ch )anner as the Co))ission )a" pro$ide.
Section !". /led.in. a 1ecurity or "nterest Therein. M +n addition to other )ethods reco!ni'ed b" law# a
pled!e of# incl%din! an %ncerticated sec%rit"# is properl" constit%ted and the instr%)ent pro$in! the ri!ht
pled!ed shall be considered deli$ered to the creditor %nder Articles (3A* and (3A2 of the Ci$il Code if a
sec%rities inter)ediar" indicates b" book entr" that s%ch sec%rit" has been credited to a speciall"
desi!nated pled!e acco%nt in fa$or of the pled!ee. A pled!e %nder this s%bsection has the e/ect of the
deli$er" of a sec%rit" in bearer for) or d%l" indorsed in blank representin! the .%antit" or a)o%nt of s%ch
sec%rit" or ri!ht pled!ed. +n the case of a re!istered clearin! a!enc"# the proced%res b" which# and the
e&act ti)e at which# s%ch book-entries are created shall be !o$erned b" the re!istered clearin! a!enc"Ns
r%les. Jowe$er# the corporation shall not be bo%nd b" the fore!oin! transactions %nless the corporate
secretar" is d%l" notied in s%ch )anner as the Co))ission )a" pro$ide.
Section !6. "ssuer?s Responsibility for 4ron.ful Transfer to Re.istered Clearin. !.ency. - The re!istration
of a transfer of a sec%rit" into the na)e of and b" a re!istered clearin! a!enc" or its na)e of or b" a
re!istered clearin! a!enc" or its no)inee shall be nal and concl%si$e %nless the clearin! a!enc" had
notice of an ad$erse clai) before the re!istration was )ade. The abo$e pro$isions which the clai)ant )a"
ha$e a!ainst the iss%er for wron!f%l re!istration in s%ch circ%)stances.
Section !#. /ower of the Commission 4ith Respect to 1ecurities 7wnership. M The Co))ission is
a%thori'e# ha$in! d%e re!ard to the p%blic interest and the protection of in$estors# to pro)%l!ate r%les and
re!%lations which-
,7.1. Validate the transfer of sec%rities b" book-entries rather than the deli$er" of ph"sical certicates1
,7.(. 0stablish when a person ac.%ires a sec%rit" or an interest therein and when deli$er" of a sec%rit" to
a p%rchaser occ%rs1
,7.*. 0stablish which records constit%te the best e$idence of a personNs interests in a sec%rit" and the
e/ect of an" errors in electronic records of ownership1
GSV-28
,7.,. Codif" the ri!hts of in$estors who choose to hold their sec%rities indirectl" thro%!h a re!istered
clearin! a!enc" and@ or other sec%rities inter)ediaries1
,7.2. Codif" the d%ties of sec%rities inter)ediaries (incl%din! clearin! a!encies) who hold sec%rities on
behalf of in$estors1 and
,7.5 Gi$e rst priorit" to an" clai)s of a re!istered clearin! a!enc" a!ainst a participant arisin! fro) a
fail%re b" the participant to )eet its obli!ations %nder the clearin! a!enc"Ns r%les in respect of the clearin!
and settle)ent of transactions in sec%rities# in a dissol%tion of the participant# and an" s%ch r%les and
re!%lation shall bind the iss%ers of the sec%rities# in$estors in the sec%rities# an" third parties with interests
in the sec%rities# and the creditors of a participant of a re!istered clearin! a!enc".
CHAPTER ,II
MARGIN AND CREDIT
Section !8. ar.in Requirements. M ,8.1. :or the p%rpose of pre$entin! the e&cessi$e %se of credit for the
p%rchase or carr"in! of sec%rities# the Co))ission# in accordance with the credit and )onetar" policies
that )a" be pro)%l!ated fro) ti)e to ti)e b" the 6onetar" Hoard of the Han!ko Sentral n! Pilipinas# shall
prescribed r%les and re!%lations with respect to the a)o%nt of credit that )a" be e&tended on an"
sec%rit". :or the e&tension of credit# s%ch r%les and re!%lations shall be based %pon the followin! standard-
An a)o%nt not !reater than the whiche$er is the hi!her of M
(a) Si&t"-$e per centum (52>) of the c%rrent )arket price of the sec%rit"# or
(b) Dne h%ndred per centum (133>) of the lowest )arket price of the sec%rit" d%rin! the precedin!
thirt"-si& (*5) calendar )onths# b%t not )ore than se$ent"-$e per centum (72>) of the c%rrent
)arket price.
Jowe$er# the 6onetar" Hoard )a" increase or decrease the abo$e percenta!es# in order to achie$e the
ob<ecti$es of the Go$ern)ent with d%e re!ard for pro)otion of the econo)" and pre$ention of the %se of
e&cessi$e credit.
S%ch r%les and re!%lations )a" )ake appropriate pro$ision with respect to the carr"in! of %nder)ar!ined
acco%nts for li)ited periods and %nder specied conditions1 the withdrawal of f%nds or sec%rities1 the
transfer of acco%nts fro) one lender to another1 special or di/erent )ar!in re.%ire)ents for dela"ed
deli$eries# short sales# arbitra!e transactions# and sec%rities to which letter (b) of the second para!raph of
this s%bsection does not appl"1 the )ethods to be %sed in calc%latin! loans# and )ar!ins and )arket
prices1 and si)ilar ad)inistrati$e ad<%st)ents and details.
,8.(. Eo )e)ber of an 0&chan!e or broker or dealer shall# directl" or indirectl"# e&tend or )aintain credit
is e&tended and )aintain credit or arran!e for the e&tension or )aintenance of credit to or for an"
c%sto)er-
(a) Dn an" sec%rit" %nless s%ch credit is e&tended and )aintained in accordance with the r%les and
re!%lations which the Co))ission shall prescribe %nder this Section incl%din! r%les settin! credit in
relation to net capital of s%ch )e)ber# broker or dealer1 and
(b) 4itho%t collateral or an" collateral other than sec%rities# e&cept (+) to )aintain a credit initiall"
e&tended in confor)it" with r%les and re!%lations of the Co))ission and (ii) in cases where the
e&tension or )aintenance of credit is not for the p%rpose of p%rchasin! or carr"in! sec%rities or of
e$adin! or circ%)$entin! the pro$isions of para!raph (a) of this s%bsection.
,8.* An" person not s%b<ect to S%bsection ,8.( hereof shall e&tend or )aintain credit or arran!e for the
e&tension or )aintenance of credit for the p%rpose of p%rchasin! or carr"in! an" sec%rit"# onl" in
accordance with s%ch r%les and re!%lations as the Co))ission shall prescribe to pre$ent the e&cessi$e %se
of credit for the p%rchasin! or carr"in! of or tradin! in sec%rities in circ%)$ention of the other pro$isions of
this Section.. S%ch r%les and re!%lations )a" i)pose %pon all loans )ade for the p%rpose of p%rchasin! or
carr"in! sec%rities li)itations si)ilar to those i)posed %pon )e)bers# brokers# or dealers b" S%bsection
,8.( and the r%les and re!%lations there%nder. This s%bsection and the r%les and re!%lations there%nder
shall not appl"-
(a) To a credit e&tension )ade b" a person not in the ordinar" co%rse of b%siness1 (b) to a loan to a
dealer to aid in the nancin! of the distrib%tion of sec%rities to c%sto)ers not thro%!h the )edi%)
of an 0&chan!e1 or (c) To s%ch other credit e&tension as the Co))ission shall e&e)pt fro) the
operation of this s%bsection and the r%les and re!%lations there%nder %pon specied ter)s and
conditions for stated period.
GSV-2A
Section !$. Restrictions on 5orrowin.s by embers, 5rokers, and 'ealers. M +t shall be %nlawf%l for an"
re!istered broker or dealer# or )e)ber of an 0&chan!e# directl" or indirectl"1
,A.1. To per)it in the ordinar" co%rse of b%siness as a broker or dealer his a!!re!ate indebtedness
incl%din! c%sto)ersN credit balances# to e&ceed s%ch percenta!e of the net capital (e&cl%si$e of &ed
assets and $al%e of 0&chan!e )e)bership) e)plo"ed in the b%siness# b%t not e&ceedin! in an" case to
tho%sand percentum((#333>)# as the Co))ission )a" be r%les and re!%lations prescribe as necessar" or
appropriate in the p%blic interest or for the protection of in$estors.
,A.(. To pled!e# )ort!a!e# or otherwise enc%)ber or arran!e for the pled!e# )ort!a!e# or enc%)brance
of an" sec%rit" carried for the acco%nt of an" c%sto)er %nder circ%)stances- (a) That will per)it the
co))in!lin! of his sec%rities# witho%t his written consent# with the sec%rities of an" c%sto)er1 (b) That will
per)it s%ch sec%rities to be co))in!led with the sec%rities of an" person other than a bona
fde c%sto)er1 or (c) that will per)it s%ch sec%rities to be pled!ed# )ort!a!ed or enc%)bered# or
s%b<ected to an" lien or clai) of the pled!ee# for a s%) in e&cess of the a!!re!ate indebtedness of s%ch
c%sto)ers in respect of s%ch sec%rities. Jowe$er# the Co))ission# ha$in! d%e re!ard to the protection of
in$estors# )a"# b" r%les and re!%lations# allow certain transactions that )a" otherwise be prohibited %nder
this s%bsection.
,A.*. To lend or arran!e for the lendin! of an" sec%rit" carried for the acco%nt of an" c%sto)er witho%t the
written consent of s%ch c%sto)er or in contra$ention of s%ch r%les and re!%lations as the Co))ission shall
prescribe.
Section "&. (nforcement of ar.in Requirement and Restrictions on 5orrowin.. M To pre$ent indirect
$iolations of the )ar!in re.%ire)ents %nder Section ,8# the broker or dealer shall re.%ire the c%sto)er in
non-)ar!in transactions to pa" the price of the sec%rit" p%rchased for his acco%nt within s%ch period as
the Co))ission )a" prescribe# which shall in no case e&ceed the prescribed settle)ent date. Dtherwise#
the broker shall sell the sec%rit" p%rchased startin! on the ne&t tradin! da" b%t not be"ond ten (13)
tradin! da"s followin! the last da" for the c%sto)er to pa" s%ch p%rchase price# %nless s%ch sale cannot
be e/ected within said period for <%stiable reasons. The sale shall be witho%t pre<%dice to the ri!ht of the
broker or dealer to reco$er an" decienc" fro) the c%sto)er. To pre$ent indirect $iolation of the
restrictions on borrowin! %nder Section ,A# the broker shall# %nless otherwise directed b" the c%sto)er#
pa" the net sales price of the sec%rities sold for a c%sto)er within the sa)e period as abo$e prescribed b"
the Co))ission- /ro%ided# That the c%sto)er shall be re.%ired to deli$er the instr%)ents e$idencin! the
sec%rities as a condition for s%ch pa")ent %pon de)and b" the broker.
CHAPTER ,III
GENERAL PROVISIONS
Section "1. -iabilities of Controllin. /ersons, !ider and !bettor and 7ther 1econdary -iability. 21.1. 0$er"
person who# b" or thro%!h stock ownership# a!enc"# or otherwise# or in connection with an a!ree)ent or
%nderstandin! with one or )ore other persons# controls an" person liable %nder this Code or the r%les or
re!%lations of the Co))ission there%nder# shall also be liable <ointl" and se$erall" with and to the sa)e
e&tent as s%ch controlled persons to an" person to who) s%ch controlled person is liable# %nless the
controllin! person pro$es that# despite the e&ercise of d%e dili!ence on his part# he has no knowled!e of
the e&istence of the facts b" reason of which the liabilit" of the controlled person is alle!ed to e&ist.
21.(. +t shall be %nlawf%l for an" person# directl"# or indirectl"# to do an" act or thin! which it wo%ld be
%nlawf%l for s%ch person to do %nder the pro$isions of this Code or an" r%le or re!%lation there%nder.
21.(. +t shall be %nlawf%l for an" director or o?cer of# or an" owner of an" sec%rities iss%ed b"# an" iss%er
re.%ired to le an" doc%)ent# report or other infor)ation %nder this Code or an" r%le or re!%lation of the
Co))ission there%nder# witho%t <%st ca%se# to hinder# dela" or obstr%ct the )akin! or lin! of an" s%ch
doc%)ent# report# or infor)ation.
21.*. +t shall be %nlawf%l for an" person to aid# abet# co%nsel# co))and# ind%ce or proc%re an" $iolation of
this Code# or an" r%le# re!%lation or order of the Co))ission there%nder.
2(.,. 0$er" person who s%bstantiall" assists the act or o)ission of an" person pri)aril" liable %nder
Sections 27# 28# 2A and 53 of this Code# with knowled!e or in reckless disre!ard that s%ch act or o)ission
is wron!f%l# shall be <ointl" and se$erall" liable as an aider and abettor for da)a!es res%ltin! fro) the
cond%ct of the person pri)aril" liable- /ro%ided, howe%er, That an aider and abettor shall be liable onl" to
the e&tent of his relati$e contrib%tion in ca%sin! s%ch da)a!es in co)parison to that of the person
pri)aril" liable# or the e&tent to which the aider and abettor was %n<%stl" enriched thereb"# whiche$er is
!reater.
Section "2. !ccounts and Records, Reports, (&amination of (&chan.es, members, and 7thers. M 2(.1.
0$er" re!istered 0&chan!e# broker or dealer# transfer a!ent# clearin! a!enc"# sec%rities association# and
GSV-53
other self-re!%lator" or!ani'ation# and e$er" other person re.%ired to re!ister %nder this Code# shall )ake#
keep and preser$e for s%ch periods# records# f%rnish s%ch copies thereof# and )ake s%ch reports# as the
Co))ission b" its r%les and re!%lations )a" prescribe. S%ch acco%nts# correspondence# )e)oranda#
papers# books# and other records shall be s%b<ect at an" ti)e to s%ch reasonable periodic# special or other
e&a)inations b" representati$es of the Co))ission as the Co))ission )a" dee) necessar" or
appropriate in the p%blic interest of for the protection of in$estors.
2(.(. An" brother# dealer or other person e&tendin! credit# who is s%b<ect to the r%les and re!%lations
prescribed b" the Co))ission p%rs%ant to this Code# shall )ake s%ch reports to the Co))ission as )a"
be necessar" or appropriate to enable it to perfor) the f%nctions conferred %pon it b" this Code.
2(.*. :or p%rposes of this Section# the ter) "records refers to acco%nts# correspondence# )e)oranda#
tapes# discs# papers# books and other doc%)ents or transcribed infor)ation of an" t"pe# whether written
or electronic in character.
Section ". "n%esti.ations, "n$unctions and /rosecution of 7)enses. 2*.1. The Co))ission )a"# in its
discretion# )ake s%ch in$esti!ations as it dee)s necessar" to deter)ine whether an" person has $iolated
or is abo%t to $iolate an" pro$ision of this Code# an" r%le# re!%lation or order there%nder# or an" r%le of an
0&chan!e# re!istered sec%rities association# clearin! a!enc"# other self-re!%lator" or!ani'ation# and )a"
re.%ire or per)it an" person to le with it a state)ent in writin!# %nder oath or otherwise# as the
Co))ission shall deter)ine# as to all facts and circ%)stances concernin! the )atter to be in$esti!ated.
The Co))ission )a" p%blish infor)ation concernin! an" s%ch $iolations# and to in$esti!ate an" fact#
condition# practice or )atter which it )a" dee) necessar" or proper to aid in the enforce)ent of the
pro$isions of this Code# in the prescribin! of r%les and re!%lations there%nder# or in sec%rin! infor)ation to
ser$e as a basis for reco))endin! f%rther le!islation concernin! the )atters to which this Code
relates- /ro%ided, howe%er# That an" person re.%ested or s%bpoenaed to prod%ce doc%)ents or testif" in
an" in$esti!ation shall si)%ltaneo%sl" be notied in writin! of the p%rpose of s%ch in$esti!ation- /ro%ided,
further# That all cri)inal co)plaints for $iolations of this Code# and the i)ple)entin! r%les and re!%lations
enforced or ad)inistered b" the Co))ission shall be referred to the 9epart)ent of O%stice for preli)inar"
in$esti!ation and prosec%tion before the proper co%rt- /ro%ided, furthermore# That in instances where the
law allows independent ci$il or cri)inal proceedin!s of $iolations arisin! fro) the sa)e act# the
Co))ission shall take appropriate action to i)ple)ent the sa)e- pro%ided, fnally, That the in$esti!ation#
prosec%tion# and trial of s%ch cases shall be !i$en priorit".
2*.(. :or the p%rpose of an" s%ch in$esti!ation# or an" other proceedin! %nder this Code# the Co))ission
or an" o?cer desi!nated b" it is e)powered to ad)inister oaths and a?r)ations# subpoena witnesses#
co)pel attendance# take e$idence# re.%ire the prod%ction of an" book# paper# correspondence#
)e)orand%)# or other record which the Co))ission dee)s rele$ant or )aterial to the in.%ir"# and to
perfor) s%ch other acts necessar" in the cond%ct of s%ch in$esti!ation or proceedin!s.
2*.*. 4hene$er it shall appear to the Co))ission that an" person has en!a!ed or is abo%t to en!a!e in
an" act or practice constit%tin! a $iolation of an" pro$ision of this Code# an" r%le# re!%lation or order
there%nder# or an" r%le of an 0&chan!e# re!istered sec%rities association# clearin! a!enc" or other self-
re!%lator" or!ani'ation# it )a" iss%e an order to s%ch person to desist fro) co))ittin! s%ch act or
practice- /ro%ided, howe%er, That the Co))ission shall not char!e an" person with $iolation of the r%les of
an 0&chan!e or other self-re!%lator" or!ani'ation %nless it appears to the Co))ission that s%ch 0&chan!e
or other self-re!%lator" or!ani'ation is %nable or %nwillin! to take action a!ainst s%ch person. After ndin!
that s%ch person has en!a!ed in an" s%ch act or practice and that there is a reasonable likelihood of
contin%in!# f%rther or f%t%re $iolations b" s%ch person# the Co))ission )a" iss%e e&*parte a cease and
desist order for a )a&i)%) period of ten (13) da"s# en<oinin! the $iolation and co)pellin! co)pliance
with s%ch pro$ision. The Co))ission )a" trans)it s%ch e$idence as )a" be a$ailable concernin! an"
$iolation of an" pro$ision of this Code# or an" r%le# re!%lation or order there%nder# to the 9epart)ent of
O%stice# which )a" instit%te the appropriate cri)inal proceedin!s %nder this Code.
2*.,. An" person who# within his power b%t witho%t ca%se# fails or ref%ses to co)pl" with an" lawf%l order#
decision or subpoena iss%ed b" the Co))ission %nder S%bsection 2*.( or S%bsection 2*.* or Section 5, of
this Code# shall after d%e notice and hearin!# be !%ilt" of conte)pt of the Co))ission. S%ch person shall
be ned in s%ch reasonable a)o%nt as the Co))ission )a" deter)ine# or when s%ch fail%re or ref%sal is a
clear and open deance of the Co))issionNs order# decision or subpoena, shall be detained %nder an
arrest order iss%ed b" the Co))ission# %ntil s%ch order# decision or subpoena is co)plied with.
Section "!. !dministrati%e 1anctions. M 2,.1. +f# after d%e notice and hearin!# the Co))ission nds that-
(a) There is a $iolation of this Code# its r%le# or its orders1 (b) An" re!istered broker or dealer# associated
person thereof has failed reasonabl" to s%per$ise# with a $iew to pre$entin! $iolations# another person
s%b<ect to s%per$ision who co))its an" s%ch $iolation1 (c) An" re!istrant or other person has# in a
re!istration state)ent or in other reports# applications# acco%nts# records or doc%)ents re.%ired b" law or
r%les to be led with the Co))ission# )ade an" %ntr%e state)ent of a )aterial fact# or o)itted to state
an" )aterial fact re.%ired to be stated their or necessar" to )ake the state)ents therein not )isleadin!1
or# in the case of an %nderwriter# has failed to cond%ct an in.%ir" with reasonable dili!ence to ins%re that a
GSV-51
re!istration state)ent is acc%rate and co)plete in all )aterial respects1 or (d) An" person has ref%sed to
per)it an" lawf%l e&a)inations into its a/airs# it shall# in its discretion# and s%b<ect onl" to the li)itations
hereinafter prescribed# i)pose an" or all of the followin! sanctions as )a" be appropriate in li!ht of the
facts and circ%)stances-
(i) S%spension# or re$ocation of an" re!istration for the o/erin! of sec%rities1
(ii) A ne of no less than Ten tho%sand pesos (P13#333.33) nor )ore than Dne )illion pesos
(P1#333#333.33) pl%s not )ore than Two tho%sand pesos (P(#333.33) for each da" of contin%in!
$iolation1
(iii) +n the case of a $iolation of Sections 1A.(# (3# (,# (5 and (7# dis.%alication fro) bein! an
o?cer# )e)ber of the Hoard of 9irectors# or person perfor)in! si)ilar f%nctions# of an iss%er
re.%ired to le reports %nder Section 17 of this Code or an" other act# r%le or re!%lation
ad)inistered b" the Co))ission1
(i$) +n the case of a $iolation of Section *,# a ne of no )ore than three (*) ti)es the prot !ained
or loss a$oided as res%lt of the p%rchase# sale or co))%nication proscribed b" s%ch Section# and
($) Dther penalties within the power of the Co))ission to i)pose.
2,.(. The i)position of the fore!oin! ad)inistrati$e sanctions shall be witho%t pre<%dice to the lin! of
cri)inal char!es a!ainst the indi$id%als responsible for the $iolation.
2,.*. The Co))ission shall ha$e the power to iss%e writs of e&ec%tion to enforce the pro$isions of the
Section and to enforce pa")ent of the fees and other d%es collectible %nder this Code.
Section "". 1ettlement 7)ers. M 22.1. At an" ti)e# d%rin! an in$esti!ation or proceedin! %nder this Code#
parties bein! in$esti!ated and@or char!ed )a" propose in writin! an o/er of settle)ent with the
Co))ission.
22.(. Bpon receipt of s%ch o/er of settle)ent# the Co))ission )a" consider the o/er based on ti)in!# the
nat%re of the in$esti!ation or proceedin!# and the p%blic interest.
22.*. The Co))ission )a" onl" a!ree to a settle)ent o/er based on its ndin!s that s%ch settle)ent is in
the p%blic interest. An" a!ree)ent to settle shall ha$e no le!al e/ect %ntil p%blicl" disclosed. S%ch
decision )a" be )ade witho%t a deter)ination of !%ilt on the part of the person )akin! the o/er.
22.,. The Co))ission shall adopt r%les and proced%res !o$ernin! the lin!# re$iew# withdrawal# for) of
re<ection and acceptance of s%ch o/ers.
Section "6. Ci%il -iabilities on !ccount of False Re.istration 1tatement. 25.1. An" person ac.%irin! a
sec%rit"# the re!istration state)ent of which or an" part thereof contains on its e/ecti$it" an %ntr%e
state)ent of a )aterial fact or o)its to state a )aterial fact re.%ired to be stated therein or necessar" to
)ake s%ch state)ents not )isleadin!# and who s%/ers da)a!e# )a" s%e and reco$er da)a!es fro) the
followin! en%)erated persons# %nless it is pro$ed that at the ti)e of s%ch ac.%isition he knew of s%ch
%ntr%e state)ent or o)ission-
(a) The iss%er and e$er" person who si!ned the re!istration state)ent-
(b) 0$er" person who was a director of# or an" other person perfor)in! si)ilar f%nctions# or a
partner in# the iss%er at the ti)e of the lin! of the re!istration state)ent or an" part# s%pple)ent
or a)end)ent thereof with respect to which his liabilit" is asserted1
(c) 0$er" person who is na)ed in the re!istration state)ent as bein! or abo%t to beco)e a director
of# or a person perfor)in! si)ilar f%nctions# or a partner in# the iss%er and whose written consent
thereto is led with the re!istration state)ent1
(d) 0$er" a%ditor or a%ditin! r) na)ed as ha$in! certied an" nancial state)ents %sed in
connection with the re!istration state)ent or prospect%s.
(e) 0$er" person who# with his written consent# which shall be led with the re!istration state)ent#
has been na)ed as ha$in! prepared or certied an" part of the re!istration state)ent# or as ha$in!
prepared or certied an" report or $al%ation which is %sed in connection with the re!istration
state)ent# with respect to the state)ent# report# or $al%ation# which p%rports to ha$e been
prepared or certied b" hi).
GSV-5(
(f) 0$er" sellin! shareholder who contrib%ted to and certied as to the acc%rac" of a portion of the
re!istration state)ent# with respect to that portion of the re!istration state)ent which p%rports to
ha$e been contrib%ted b" hi).
(!) 0$er" %nderwriter with respect to s%ch sec%rit".
25.(. +f the person who ac.%ired the sec%rit" did so after the iss%er has )ade !enerall" a$ailable to its
sec%rit" holders an inco)e state)ent co$erin! a period of at least twel$e (1() )onths be!innin! fro) the
e/ecti$e date of the re!istration state)ent# then the ri!ht of reco$er" %nder this s%bsection shall be
conditioned on proof that s%ch person ac.%ired the sec%rit" rel"in! %pon s%ch %ntr%e state)ent in the
re!istration state)ent or rel"in! %pon the re!istration state)ent and not knowin! of s%ch inco)e
state)ent# b%t s%ch reliance )a" be established witho%t proof of the readin! of the re!istration state)ent
b" s%ch person.
Section "#. Ci%il -iabilities !risin. in Connection 4ith /rospectus, Communications and Reports. 27.1.
An" person who-
(a) D/ers to sell or sells a sec%rit" in $iolation of Chapter +++# or
(b) D/ers to sell or sells a sec%rit"# whether or not e&e)pted b" the pro$isions of this Code# b" the
%se of an" )eans or instr%)ents of transportation or co))%nication# b" )eans of a prospect%s or
other written or oral co))%nication# which incl%des an %ntr%e state)ent of a )aterial fact or o)its
to state a )aterial fact necessar" in order to )ake the state)ents# in the li!ht of the circ%)stances
%nder which the" were )ade# not )isleadin! (the p%rchaser not knowin! of s%ch %ntr%th or
o)ission)# and who shall fail in the b%rden of proof that he did not know# and in the e&ercise of
reasonable care co%ld not ha$e known# of s%ch %ntr%th or o)ission# shall be liable to the person
p%rchasin! s%ch sec%rit" fro) hi)# who )a" s%e to reco$er the consideration paid for s%ch sec%rit"
with interest thereon# less the a)o%nt of an" inco)e recei$ed thereon# %pon the tender of s%ch
sec%rit"# or for da)a!es if he no lon!er owns the sec%rit".
27.(. An" person who shall )ake or ca%se to be )ade an" state)ent in an" report# or doc%)ent led
p%rs%ant to this Code or an" r%le or re!%lation there%nder# which state)ent as at the ti)e and in the li!ht
of the circ%)stances %nder which it was )ade false or )isleadin! with respect to an" )aterial fact# shall
be liable to an" person who# not knowin! that s%ch state)ent was false or )isleadin!# and rel"in! %pon
s%ch state)ent shall ha$e p%rchased or sold a sec%rit" at a price which was a/ected b" s%ch state)ent#
for da)a!es ca%sed b" s%ch reliance# %nless the person s%ed shall pro$e that he acted in !ood faith and
had no knowled!e that s%ch state)ent was false or )isleadin!.
Section "8. Ci%il -iability of Fraud in Connection with 1ecurities Transactions. M An" person who en!a!es
in an" act or transaction in $iolation of Sections 1A.(# (3 or (5# or an" r%le or re!%lation of the Co))ission
there%nder# shall be liable to an" other person who p%rchases or sells an" sec%rit"# !rants or ref%ses to
!rant an" pro&"# consent or a%thori'ation# or accepts or declines an in$itation for tender of a sec%rit"# as
the case )a" be# for the da)a!es s%stained b" s%ch other person as a res%lt of s%ch act or transaction.
Section "$. Ci%il -iability for anipulation of 1ecurity /rices. M An" person who willf%ll" participates in an"
act or transaction in $iolation of Section (, shall be liable to an" person who shall p%rchase or sell an"
sec%rit" at a price which was a/ected b" s%ch act or transaction# and the person so in<%red )a" s%e to
reco$er the da)a!es s%stained as a res%lt of s%ch act or transaction.
Section 6&. Ci%il -iability with Respect to Commodity Futures Contracts and /re*need /lans. M 53.1. An"
person who en!a!es in an" act or transactions in willf%l $iolation of an" r%le or re!%lation pro)%l!ated b"
the Co))ission %nder Section 11 or 15# which the Co))ission deno)inates at the ti)e of iss%ance as
intended to prohibit fra%d in the o/er and sale of pre-need plans or to prohibit fra%d# )anip%lation#
ctitio%s transactions# %nd%e spec%lation# or other %nfair or ab%si$e practices with respect to co))odit"
f%t%re contracts# shall be liable to an" other person s%stainin! da)a!es as a res%lt of s%ch act or
transaction.
53.(. As to each s%ch r%le or re!%lation so deno)inated# the Co))ission b" r%le shall prescribe the
ele)ents of proof re.%ired for reco$er" and an" li)itations on the a)o%nt of da)a!es that )a" be
i)posed.
Section 61. Ci%il -iability on !ccount of "nsider Tradin.. M 51.1. An" insider who $iolates S%bsection (7.1
and an" person in the case of a tender o/er who $iolates S%bsection (7., (a)(+)# or an" r%le or re!%lation
there%nder# b" p%rchasin! or sellin! a sec%rit" while in possession of )aterial infor)ation not !enerall"
a$ailable to the p%blic# shall be liable in a s%it bro%!ht b" an" in$estor who# conte)poraneo%sl" with the
p%rchase or sale of sec%rities that is the s%b<ect of the $iolation# p%rchased or sold sec%rities of the sa)e
class %nless s%ch insider# or s%ch person in the case of a tender o/er# pro$es that s%ch in$estor knew the
GSV-5*
infor)ation or wo%ld ha$e p%rchased or sold at the sa)e price re!ardless of disclos%re of the infor)ation
to hi).
51.(. An insider who $iolates S%bsection (7.* or an" person in the case of a tender o/er who $iolates
S%bsection (7., (a)# or an" r%le or re!%lation there%nder# b" co))%nicatin! )aterial nonp%blic
infor)ation# shall be <ointl" and se$erall" liable %nder S%bsection 51.1 with# and to the sa)e e&tent as# the
insider# or person in the case of a tender o/er# to who) the co))%nication was directed and who is liable
%nder S%bsection 51.1 b" reason of his p%rchase or sale of a sec%rit".
Section 62. -imitation of !ctions. M 5(.1. Eo action shall be )aintained to enforce an" liabilit" created
%nder Section 25 or 27 of this Code %nless bro%!ht within two (() "ears after the disco$er" of the %ntr%e
state)ent or the o)ission# or# if the action is to enforce a liabilit" created %nder S%bsection 27.1 (a)#
%nless# bro%!ht within two (() "eas after the $iolation %pon which it is based. +n no e$ent shall an s%ch
action be bro%!ht to enforce a liabilit" created %nder Section 25 or S%bsection 27.1 (a) )ore than $e (2)
"ears after the sec%rit" was bona fde o/ered to the p%blic# or %nder S%bsection 27.1 (b3 )ore than $e
(2) "ears after the sale.
5(.(. Eo action shall be )aintained to enforce an" liabilit" created %nder an" other pro$ision of this Code
%nless bro%!ht within two ((3 "ears after the disco$er" of the facts constit%tin! the ca%se of action and
within $e (2) "ears after s%ch ca%se of action accr%ed.
Section 6. !mount of 'ama.es to be !warded. M 5*.1. All s%its to reco$er da)a!es p%rs%ant to Sections
25# 27# 28# 2A# 53 and 51 shall be bro%!ht before the =e!ional Trial Co%rt# which shall ha$e e&cl%si$e
<%risdiction to hear and decide s%ch s%its. The Co%rt is hereb" a%thori'ed to award da)a!es in an a)o%nt
not e&ceedin! triple the a)o%nt of the transaction pl%s act%al da)a!es.
0&e)plar" da)a!es )a" also be awarded in cases of bad faith# fra%d# )ale$olence or wantonness in the
$iolation of this Code or the r%les and re!%lations pro)%l!ated there%nder.
The Co%rt is also a%thori'ed to award attorne"Ns fees not e&ceedin! thirt" percentum (*3>) of the award.
5*.(. The persons specied in Sections 25# 27# 28# 2A# 53 and 51 hereof shall be <ointl" and se$erall" liable
for the pa")ent of da)a!es. Jowe$er# an" person who beco)es liable for the pa")ent of s%ch da)a!es
)a" reco$er contrib%tion fro) an" other person who# if s%ed separatel"# wo%ld ha$e been liable to )ake
the sa)e pa")ent# %nless the for)er was !%ilt" of fra%d%lent representation and the latter was not.
5*.*. Eotwithstandin! an" pro$ision of law to the contrar"# all persons# incl%din! the iss%er# held liable
%nder the pro$isions of Sections 25# 27# 28# 2A# 53 and 51 shall contrib%te e.%all" to the total liabilit"
ad<%d!ed herein. +n no case shall the principal stockholders# directors and other o?cers of the iss%er or
persons occ%p"in! si)ilar positions therein# reco$er their contrib%tion to the liabilit" fro) the iss%er.
Jowe$er# the ri!ht of the iss%er to reco$er fro) the !%ilt" parties the a)o%nt it has contrib%ted %nder this
Section shall not be pre<%diced.
Section 6!. Cease and 'esist 7rder. M 5,.1. The Co))ission# after proper in$esti!ation or
$erication# motu proprio or %pon $eried co)plaint b" an" a!!rie$ed part"# )a" iss%e a cease and desist
order witho%t the necessit" of a prior hearin! if in its <%d!)ent the act or practice# %nless restrained# will
operate as a fra%d on in$estors or is otherwise likel" to ca%se !ra$e or irreparable in<%r" or pre<%dice to the
in$estin! p%blic.
5,.(. Bntil the Co))ission iss%e a cease and desist order# the fact that an in$esti!ation has been initiated
or that a co)plaint has been led# incl%din! the contents of the co)plaint# shall be condential. Bpon
iss%ance of a cease and desist order# the Co))ission shall )ake p%blic s%ch order and a cop" thereof
shall be i))ediatel" f%rnished to each person s%b<ect to the order.
5,.*. An" person a!ainst who) a cease and desist order was iss%ed )a"# within $e (2) da"s fro) receipt
of the order# le a for)al re.%est for a liftin! thereof. Said re.%est shall be set for hearin! b" the
Co))ission not later than fteen (12) da"s fro) its lin! and the resol%tion thereof shall be )ade not
later than ten (13) da"s fro) the ter)ination of the hearin!. +f the Co))ission fails to resol$e the re.%est
within the ti)e herein prescribed# the cease and desist order shall a%to)aticall" be lifted.
Section 6". 1ubstituted 1er%ice @pon the Commission. M Ser$ice of s%))ons or other process shall be
)ade %pon the Co))ission in actions or le!al proceedin!s a!ainst an iss%er or an" person liable %nder
this Code who is not do)iciled in the Philippines. Bpon receipt b" the Co))ission of s%ch s%))ons# the
Co))ission shall within ten (13) da"s thereafter# trans)it b" re!istered )ail a cop" of s%ch s%))ons and
the co)plaint or other le!al process to s%ch iss%er or person at his last known address or principal o?ce.
The sendin! thereof b" the Co))ission# the e&penses for which shall be ad$anced b" the part" at whose
instance it is )ade# shall co)plete s%ch ser$ice.
GSV-5,
Section 66. Re%elation of "nformation Filed with the Commission. M 55.1. All infor)ation led with the
co))ission in co)pliance with the re.%ire)ents of this Code shall be )ade a$ailable to an" )e)ber of
the !eneral p%blic# %pon re.%est# in the pre)ises and d%rin! re!%lar o?ce ho%rs of the Co))ission#
e&cept as set forth in this Section.
55.(. Eothin! in this Code shall be constr%ed to re.%ire# or to a%thori'e the Co))ission to re.%ire# the
re$ealin! of trade secrets or processes in an" application# report# or doc%)ent led with the Co))ission.
55.*. An" person lin! an" s%ch application# report or doc%)ent )a" )ake written ob<ection to the p%blic
disclos%re of infor)ation contained therein# statin! the !ro%nds for s%ch ob<ection# and the Co))ission
)a" hear ob<ections as it dee)s necessar". The Co))ission )a"# in s%ch cases# )ake a$ailable to the
p%blic the infor)ation contained in an" s%ch application# report# or doc%)ent onl" when a disclos%re of
s%ch infor)ation is re.%ired in the p%blic interest or for the protection of in$estors1 and copies of
infor)ation so )ade a$ailable )a" be f%rnished to an" person ha$in! a le!iti)ate interest therein at s%ch
reasonable char!e and %nder s%ch reasonable li)itations as the Co))ission )a" prescribe.
55.,. +t shall be %nlawf%l for an" )e)ber# o?cer# or e)plo"ee of the Co))ission to disclose to an" person
other than a )e)ber# o?cer or e)plo"ee of the Co))ission or to %se for personal benet# an"
infor)ation contained in an" application# report# or doc%)ent led with the Co))ission which is not )ade
a$ailable to the p%blic p%rs%ant to S%bsection 55.*.
55.2. Eotwithstandin! an"thin! in S%bsection 55., to the contrar"# on re.%est fro) a forei!n enforce)ent
a%thorit" of an" co%ntr" whose laws !rant reciprocal assistance as herein pro$ided# the Co))ission )a"
pro$ide assistance in accordance with this s%bsection# incl%din! the disclos%re of an" infor)ation led with
or trans)itted to the Co))ission. +f the re.%estin! a%thorit" states that it is cond%ctin! an in$esti!ation
which it dee)s necessar" to deter)ine whether an" person has $iolated# is $iolatin!# or is abo%t to $iolate
an" laws relatin! to sec%rities or co))odities )atters that the re.%estin! a%thorit" ad)inisters or
enforces. S%ch assistance )a" be pro$ided witho%t re!ard to whether the facts stated in the re.%est wo%ld
also constit%te a $iolation of law of the Philippines.
Section 6#. ()ect of action of Commission and @nlawful Representations with Respect Thereto. M 57.1. Eo
action or fail%re to act b" the Co))ission in the ad)inistration of this Code shall be constr%ed to )ean
that the Co))ission has in an" wa" passed %pon the )erits of or !i$en appro$al to an" sec%rit" or an"
transactions or transactions therein# nor shall s%ch action or fail%re to act with re!ard to an" state)ent or
report led with or e&a)ined b" the Co))ission p%rs%ant to this Code or the r%les and re!%lations
there%nder to be dee)ed a ndin! b" the Co))ission that s%ch state)ents or report is tr%e and acc%rate
on its face or that it is not false or )isleadin!. +t shall be %nlawf%l to )ake# or ca%se to be )ade# to an"
prospecti$e p%rchaser or seller or a sec%rit" an" representation that an" s%ch action or fail%re to act b" the
Co))ission is to be so constr%ed or has s%ch e/ect.
57.(. Eothin! contained in S%bsection 57.1 shall# howe$er# be constr%ed as an e&e)ption fro) liabilit" of
an e)plo"ee or o?cer of the Co))ission for an" nonfeasance# )isfeasance or )alfeasance in the
dischar!e of his o?cial d%ties.
Section 68. 1pecial !ccountin. Rules. M The Co))ission shall ha$e the a%thorit" to )ake# a)end# and
rescind s%ch acco%ntin! r%les and re!%lations as )a" be necessar" to carr" o%t the pro$isions of this
Code# incl%din! r%les and re!%lations as )a" be necessar" to carr" o%t the pro$isions of this Code#
incl%din! r%les and re!%lations !o$ernin! re!istration state)ents and prospect%ses for $ario%s classes of
sec%rities and iss%ers# and denin! acco%ntin!# technical and trade ter)s %sed in this Code. A)on! other
thin!s# the Co))ission )a" prescribe the for) or for)s in which re.%ired infor)ation shall be set forth#
the ite)s or details to be shown in the balance sheet and inco)e state)ent# and the )ethods to be
followed in the preparation of acco%nts# appraisal or $al%ation of assets and liabilities# deter)ination of
depreciation and depletion# di/erentiation of rec%rrin! and non-rec%rrin! inco)e# di/erentiation of
in$est)ent and operatin! inco)e# and in the preparation# where the Co))ission dee)s it necessar" or
desirable of consolidated balance sheets or inco)e acco%nts of an" person directl" or indirectl" controllin!
or controlled b" the iss%er# or an" person %nder direct or indirect co))on control with the iss%er.
Section 6$. ()ect on (&istin. -aw. M The ri!hts and re)edies pro$ided b" this Code shall be in addition to
an" and all order ri!hts and re)edies that )a" now e&ist. Jowe$er# e&cept as pro$ided in Section 25 and
5* hereof# no person per)itted to )aintain a s%it for da)a!es %nder the pro$isions of this Code shall
reco$er# thro%!h satisfaction of <%d!)ent in one or )ore actions# a total a)o%nt in e&cess of his act%al
da)a!es on acco%nt of the act co)plained of- /ro%ided# That e&e)plar" da)a!es )a" be awarded in
cases of bad faith# fra%d# )ale$olence or wantonness in the $iolation of this Code or the r%les and
re!%lations pro)%l!ated there%nder.
Section #&. Audicial Re%iew of Commission 7rders. M An" person a!!rie$ed b" an order of the Co))ission
)a" appeal the order to the Co%rt of Appeals b" petition for re$iew in accordance with the pertinent
pro$isions of the =%les of Co%rt.
GSV-52
Section #1. ,alidity of Contracts. M 71.1. An" condition# stip%lation# pro$ision bindin! an" person to wai$e
co)pliance with an" pro$ision of this Code or of an" r%le or re!%lation there%nder# or of an" r%le of an
0&chan!e re.%ired thereb"# as well as the wai$er itself# shall be $oid.
71.(. 0$er" contract )ade in $iolation of an" pro$ision of this Code or of an" r%le or re!%lation there%nder#
and e$er" contract# incl%din! an" contract for listin! a sec%rit" or an 0&chan!e heretofore or hereafter
)ade# the perfor)ance of which in$ol$es the $iolation of# or the contin%ance of an" relationship or
practice in $iolation of# an" pro$ision of this Code# or an" r%le or re!%lation there%nder# shall be $oid-
(a) As re!ards the ri!hts of an" person who# in $iolation of an" s%ch pro$ision# r%le or re!%lation#
shall ha$e )ade or en!a!ed in the perfor)ance of an" s%ch contract# and
(b) As re!ards the ri!hts of an" person who# not bein! a part" to s%ch contract# shall ha$e ac.%ired
an" ri!ht there%nder with act%al knowled!e of the facts b" reason of which the )akin! or
perfor)ance of s%ch contract was in $iolation of an" s%ch pro$ision# r%le or re!%lation.
71.*. Eothin! in this Code shall be constr%ed-
(a) To a/ect the $alidit" of an" loan or e&tension of credit )ade or of an" lien created prior or
s%bse.%ent to the e/ecti$it" of this Code# %nless at the ti)e of the )akin! of s%ch loan or
e&tension of credit or the creatin! of s%ch lien# the person )akin! s%ch loan or e&tension of credit
or ac.%irin! s%ch lien shall ha$e act%al knowled!e of the facts b" reason of which the )akin! of
s%ch loan or e&tension of credit or the ac.%isition of s%ch lien is a $iolation of the pro$isions of this
Code or an" r%les or re!%lations there%nder# or
(b) To a/ord a defense to the collection of an" debt# obli!ation or the enforce)ent of an" lien b"
an" person who shall ha$e ac.%ired s%ch debt# obli!ation or lien in !ood faith for $al%e and witho%t
act%al knowled!e of the $iolation of an" pro$ision of this Code or an" r%le or re!%lation there%nder
a/ectin! the le!alit" of s%ch debt# obli!ation or lien.
Section #2. Rules and Re.ulations0 ()ecti%ity. M 7(.1. This Code shall be self-e&ec%tor". To e/ect the
pro$isions and p%rposes of this Code# the Co))ission )a" iss%e# a)end# and rescind s%ch r%les and
re!%lations and orders necessar" or appropriate# incl%din! r%les and re!%lations denin! acco%ntin!#
technical# and trade ter)s %sed in this Code# and prescribin! the for) or for)s in which infor)ation
re.%ired in re!istration state)ents# applications# and reports to the Co))ission shall be set forth. :or
p%rposes of its r%les or re!%lations# the Co))ission )a" classif" persons# sec%rities# and other )atters
within its <%risdiction# prescribe di/erent re.%ire)ents for di/erent classes of persons# sec%rities# or
)atters# and b" r%le or order# conditionall" or %nconditionall" e&e)pt an" person# sec%rit"# or transaction#
or class or classes of persons# sec%rities or transactions# fro) an" or all pro$isions of this Code.
:ail%re on the part of the Co))ission to iss%e r%les and re!%lations shall not in an" )anner a/ect the self-
e&ec%tor" nat%re of this Code.
7(.(. The Co))ission shall pro)%l!ate r%les and re!%lations pro$idin! for reportin!# disclos%re and the
pre$ention of fra%d%lent# decepti$e or )anip%lati$e practices in connection with the p%rchase b" an iss%er#
b" tender o/er or otherwise# of and e.%it" sec%rit" of a class iss%ed b" it that satises the re.%ire)ents of
S%bsection 17.(. s%ch r%les and re!%lations )a" re.%ire s%ch iss%er to pro$ide holders of e.%it" sec%rities
of s%ch dates with s%ch infor)ation relatin! to the reasons for s%ch p%rchase# the so%rce of f%nds# the
n%)ber of shares to be p%rchased# the price to be paid for s%ch sec%rities# the )ethod of p%rchase and
s%ch additional infor)ation as the Co))ission dee)s necessar" or appropriate in the p%blic interest or for
the protection of in$estors# or which the Co))ission dee)s to be )aterial to a deter)ination b" holders
whether s%ch sec%rit" sho%ld be sold.
7(.*. :or the p%rpose of S%bsection 7(.(# a p%rchase b" or for the iss%er or an" person controllin!#
controlled b"# or %nder co))on control with the iss%er# or a p%rchase s%b<ect to the control of the iss%er or
an" s%ch person# shall be dee)ed to be a p%rchased b" the iss%er. The co))ission shall ha$e the power
to )ake r%les and re!%lations i)ple)entin! this s%bsection# incl%din! e&e)pti$e r%les and re!%lations
co$erin! sit%ations in which the Co))ission dee)s it %nnecessar" or inappropriate that a p%rchase of the
t"pe described in this s%bsection shall be dee)ed to be a p%rchase b" the iss%er for the p%rpose of so)e
or all of the pro$isions of S%bsection 7(.(.
7(.,. The r%les and re!%lations pro)%l!ated b" the Co))ission shall be p%blished in two ((3 newspapers
or !eneral circ%lation in the Philippines# and %nless otherwise prescribed b" the Co))ission# the sa)e
shall be e/ecti$e fteen (12) da"s after the date of the last p%blication.
Section #. /enalties. M An" person who $iolates an" of the pro$isions of this Code# or the r%les and
re!%lations pro)%l!ated b" the Co))ission %nder a%thorit" thereof# or an" person who# in a re!istration
state)ent led %nder this Code# )akes an" %ntr%e state)ent of a )aterial fact or o)its to state an"
GSV-55
)aterial fact re.%ired to be stated therein or necessar" to )ake the state)ents therein not )isleadin!#
shall# %pon con$iction# s%/er a ne of not less than :ift" tho%sand pesos (P23#333.33) nor )ore than :i$e
)illion pesos (P2#333#333.33) or i)prison)ent of not less than se$en (7) "ears nor )ore than twent"-one
((1) "ears# or both in the discretion of the co%rt. +f the o/ender is a corporation# partnership or association
or other <%ridical entit"# the penalt" )a" in the discretion of the co%rt be i)posed %pon s%ch <%ridical
entit" and %pon the o?cer or o?cers of the corporation# partnership# association or entit" responsible for
the $iolation# and if s%ch o?cer is an alien# he shall in addition to the penalties prescribed# be deported
witho%t f%rther proceedin!s after ser$ice of sentence.
Section #!. Transitory /ro%isions. M The Co))ission# as or!ani'ed %nder e&istin! laws# shall contin%e to
e&ist and e&ercise its powers# f%nctions and d%ties %nder s%ch laws and this Code- /ro%ided# That %ntil
otherwise )andated b" a s%bse.%ent law# the Co))ission shall contin%e to re!%late and s%per$ise
co))odit" f%t%res contracts as pro$ided in Section 11 and pre-need plans and the pre-need ind%str" as
pro$ided in Section 15 of this Code.
All f%rther re.%ire)ents herein shall be co)plied with %pon appro$al of this Code- /ro%ided, howe%er, That
co)pliance )a" be deferred for s%ch reasonable ti)e as the Co))ission )a" deter)ine b%t not to
e&ceed one (1) "ear fro) appro$al of this Code- /ro%ided, further# That sec%rities which are bein! o/ered
at the ti)e of e/ecti$it" of this Code p%rs%ant to an e/ecti$e re!istration and per)it# )a" contin%e to be
o/ered and sold in accordance with the pro$isions of the =e$ised Sec%rities Act in e/ect i))ediatel" prior
to appro$al of this Code.
All %ne&pended f%nds for the calendar "ear# properties# e.%ip)ent and records of the Sec%rities and
0&chan!e Co))ission are hereb" retained b" the Co))ission as reor!ani'ed %nder this Code and the
a)o%nt of Two h%ndred )illion pesos (P(33#333#333.33) or s%ch a)o%nt necessar" to carr" o%t the
reor!ani'ation pro$ided in this Code is hereb" appropriated.
All e)plo"ees of the Co))ission who $ol%ntaril" retire or are separated fro) the ser$ice with the
Co))ission and whose retire)ent or separation has been appro$ed b" the Co))ission# shall be paid
retire)ent or separation benets and other entitle)ent !ranted %nder e&istin! laws.
Section #". /artial @se of "ncome. M To carr" o%t the p%rposes of this Code# the Co))ission is hereb"
a%thori'ed# in addition to its ann%al b%d!et# to retain and %tili'e an a)o%nt e.%al to Dne h%ndred )illion
pesos (P133#333#333.33) fro) its inco)e.
The %se of s%ch additional a)o%nt shall be s%b<ect to the a%ditin! re.%ire)ents# standards and proced%res
%nder e&istin! laws.
Section #6. Repealin. Clause. M The =e$ised Sec%rities Act (Hatas Pa)bansa Hl!. 178)# as a)ended# are
hereb" repealed. All other laws# orders# r%les and re!%lations# or parts thereof# inconsistent with an"
pro$ision of this Code are hereb" repealed or )odied accordin!l".
Section ##. 1eparability Clause. M if an" portion or pro$ision of this Code is declared %nconstit%tional or
in$alid# the other portions or pro$isions hereof# which are not a/ected thereb" shall contin%e in f%ll force
and e/ect.
Section #8. ()ecti%ity. M This Code shall take e/ect fteen (12) da"s after its p%blication in the 7+cial
#a9etteor in two (() newspapers of !eneral circ%lation.
Appro$ed- O%l" 1A# (333
(S!d.)/OSEPH E. ESTRADA
/resident of the /hilippines
GSV-57
Re0123ic o4 t5e P5i3i00ine6
Con78e66 o4 t5e P5i3i00ine6
6etro 6anila
T9e34t5 Con78e66
T5i8: Re713;8 Se66ion
He!%n and held in 6etro 6anila# on 6onda"# the twent"-ei!ht da" of O%l"# two tho%sand three.
Re0123ic Act No. $26# M;8c5 1$. 2&&!
AN ACT PROVIDING THE REG(LATOR* FRAME)OR+ FOR SEC(RITI%ATION AND GRANTING FOR
THE P(RPOSE E,EMPTIONS FROM THE OPERATION OF CERTAIN LA)S
5e it enacted by the 1enate and 6ouse of Representati%es of the /hilippines in Con.ress assembled-
ARTICLE 1
GENERAL PROVISIONS
SECTION 1. Short Title. - This Act shall be known as "The Sec%riti'ation Act of (33,".
SECTION 2. Declaration of Policy. - +t is the polic" of the State to pro)ote the de$elop)ent of the
capital )arket b" s%pportin! sec%riti'aiton# b" pro$idin! a le!al and re!%lator" fra)ework for
sec%riti'ation and b" creatin! a fa$orable )arket en$iron)ent for a ran!e of asset-backed sec%rities. :or
this p%rpose# the State shall rationali'e the r%les# re!%lations# and laws that i)pact %pon the sec%riti'ation
process# partic%larl" on )atters of ta&ation and sale of real estate on install)ent. :%rther)ore# the State
shall p%rs%e the de$elop)ent of a secondar" )arket# partic%larl" for residential )ort!a!e-backed
sec%rities and other ho%sin!-related nancial instr%)ents# as essential to its !oal of !eneratin! in$est)ent
and acceleratin! the !rowth of the ho%sin! nance sector# especiall" for sociali'ed and low-inco)e
ho%sin!. The State shall likewise p%rs%e the de$elop)ent of a secondar" )arket for other t"pes of asset-
backed sec%rities (AHS).
GSV-58
SECTION . Defnition of Terms. - :or p%rpose of this Act# the ter)-
(a) "Sec%riti'ation" )eans the process b" which assets are sold on a witho%t reco%rse basis b" the
Seller to a Special P%rpose 0ntit" (SP0) and the iss%ance of asset-backed sec%rities (AHS) b" the
SP0 which depend# for their pa")ent# on the cash Low fro) the assets so sold and in accordance
with the Plan.
(b) Asset-backed sec%rities (AHS)" refer to the certicates iss%ed b" an SP0# the repa")ent of which
shall be deri$ed fro) the cash Low of the assets in accordance with the Plan.
(c) "Assets"# whether %sed alone or in the ter) "Asset-backed sec%rities#" refer to loans or
recei$ables or other si)ilar nancial assets with an e&pected cash pa")ent strea). The ter)
"Assets" shall incl%de# b%t shall not be li)ited to# recei$ables# )ort!a!e loans and other debt
instr%)ents- /ro%ided# That recei$ables that are to arise in the f%t%re and other recei$ables of
si)ilar nat%re shall be s%b<ect to appro$al b" the Sec%rities and 0&chan!e Co))ission (S0C) or the
Han!ko Sentral n! Pilipinas (HSP)# as the case )a" be- /ro%ided# further# That the ter) "Assets"
shall e&cl%de recei$ables fro) f%t%re e&pectation of re$en%es b" !o$ern)ent# national or local#
arisin! fro) ro"alties# fees or i)posts.
(d) "Asset Pool" )eans the !ro%p of identied# ho)o!eneo%s assets %nderl"in! the AHS.
(e) "Co))ission" refers to the Sec%rities and 0&chan!e Co))ission (S0C).
(f) "Credit 0nhance)ent" )eans an" le!all" enforceable sche)e intended to i)pro$e the
)arketabilit" of the AHS and increase the probabilit" that the holders of the AHS recei$e pa")ent of
a)o%nts d%e the) %nder the AHS in accordance with the Plan.
(!) "Dri!inator" )eans the person or entit" which was the ori!inal obli!ee of the Assets# s%ch as
nancial instit%tion that !rants a loan or a corporation in the books of which the Assets were
created in accordance with the Plan.
(h) "Plan" )eans the plan for sec%riti'ations as appro$ed b" the Co))ission
(i) "Secondar" 6ort!a!e +nstit%tion (S6+)" )eans an entit" created for the p%rpose of enhancin! a
secondar" )arket for residential )ort!a!es and ho%sin!-related AHS.
(<) "Seller" )eans the person or entit" which con$e"s to the SP0 the Assets for)in! the Asset Pool
in accordance with the Plan. +n )ost instances# the Seller )a" itself be the Dri!inator.
(k) "Ser$icer" refers to the entit" desi!nated b" the SP0 to collect and record pa")ents recei$ed on
the assets# to re)it s%ch collections to the SP0# and perfor) s%ch other ser$ices as )a" be
specicall" re.%ired b" the SP0# e&cl%din! asset )ana!e)ent or ad)inistration.
(l) "Special P%rpose 0ntit" (SP0)" )eans either a Special P%rpose Corporation (SPC) or a Special
P%rpose Tr%st (SPT).
()) "Special P%rpose Corporation (SPC)" refers to a <%ridical person created in accordance with the
Corporation Code of the Philippine solel" for the p%rpose of sec%riti'ation and to which the Seller
)akes a tr%e and absol%te sale of assets.
(n) "Special P%rpose Tr%st (SPT)" )eans a tr%st ad)inistered b" an entit" d%l" licensed to perfor)
tr%st f%nctions %nder the General Hankin! Caw# and created solel" for the p%rpose of sec%rities and
to which the Seller )akes a tr%e and absol%te sale of assets
SECTION !. Declaration of Principles. - The Co))issions shall e&ercise the powers pro$ided for in this
Act in consonance with the principle of f%ll disclos%re# transparenc" and acco%ntabilit". The Co))ission
shall incl%de in its ann%al report the list of SP0s with the correspondin! t"pes and a)o%nts of assets
scr%tini'ed.
ARTICLE II
SPECIAL P(RPOSE ENTIT*
SECTION ". Special Purpose Entity (SPE). - The SP0 in the for) of an SPC shall be a stock corporation
established in accordance with the Corporation Code of the Philippines and the r%les pro)%l!ated b" the
Co))ission solel" for the p%rpose of sec%riti'ation and re!istered as s%ch with the Co))ission. An SP0
constit%ted as an SPT shall be a tr%st ad)inistered b" an entit" d%l" licensed to perfor) tr%st f%nctions
%nder the General Hankin! Caw and need not be re!istered as s%ch with the Co))ission. +n an" e$ent# the
GSV-5A
SP0# whether in the for) of an SPT or SPC# shall be solel" or!ani'ed and operated for p%rposes of
sec%riti'ation in accordance with this Act. The Co))ission and the HSP shall# fro) ti)e to ti)e# deter)ine
the re.%ired capitali'ation for the SPCs and SPTs# respecti$el".
SECTION 6. Approval of the Plan. - After the establish)ent of an SP0 p%rs%ant to Section 2 hereof# the
proposed Plan shall be s%b)itted to the Co))ission for appro$al# which shall incl%de the followin!-
(a) The nat%re and )echanics of the sale of assets fro) the Seller to the SP0# incl%din! the ter)s#
conditions and circ%)stances specied in the Plan wherein the assets )a" be re$erted to the
Seller-
(b) The credit enhance)ents or li.%idit" s%pports for the AHS which )a" be pro$ided in the
followin! )anner-
(i) standb" letter of credit iss%ed b" a co))ercial bank or %ni$ersal bank other than the
tr%stee bank or the Dri!inator or Seller or its s%bsidiar"@a?liate# its parent co)pan" or the
parent co)pan";s s%bsidiar"@a?liate1
(ii) s%ret" bond iss%ed b" an" ins%rance co)pan" other than the Dri!inator or Seller or its
s%bsidiar" or a?liate# its parent co)pan" or the parent co)pan";s s%bsidiar" or a?liate# or
the parent or s%bsidiar" of the tr%stee bank1
(iii) !%arantee iss%ed b" an" entit" other than the Dri!inator or Seller or its
s%bsidiar"@a?liate# its parent co)pan" or the parent co)pan";s s%bsidiar"@a?liate# or the
tr%stee bank or its parent or s%bsidiar"1
(i$) o$er-collaterali'ation pro$ided b" the Seller wherein the assets con$e"ed to the SPC or
SPT e&ceed the a)o%nt of AHS to be iss%ed1
($) s%bordinated sec%rities iss%ed b" an SP0 to an" entit" incl%din! those iss%ed to the
Seller that are lower rankin!# or <%nior to other obli!ation# and are paid after clai)s to
holders of senior are satised1 and
($i) other credit enhance)ents as )a" be appro$ed b" the Co))ission.
(c) The identities and .%alications of the Dri!inator# Seller# Ser$icer# %nderwriter an dealer of the
AHS# and description of an" co)pensation the iss%er# seller or an" %nderwriter has recei$ed or will
recei$e in the f%t%re in connection with the AHS1
(d) The identit"# .%alications and co)pensation of the tr%stee that will ad)inister the assets
con$e"ed to the SP0 for the benet of the AHS holders of the AHS holders which tr%stee shall not be
related directl" or indirectl" to the Dri!inator or Sellers1
(e) The a!!re!ate principal a)o%nt of the $al%e of AHS to be iss%ed# the principal a)o%nt of each
class within the AHS# and the deno)inations which shall not be lower than :i$e tho%sand pesos
(P2#333.33) in which the AHS will be iss%ed1
(f) The str%ct%re of the AHS to be re!istered# incl%din! the str%ct%re and pa")ent priorities of each
class of certicates within the AHS# anticipated pa")ents and "ields for each class# and the
circ%)stances %nder which the AHS )a" be redee)ed or retired1
(!) A f%ll description of the assets contained# or to be contained# in the asset pool s%pportin! the
AHS1
(h) The ratin! a!enc"@a!encies for the AHS# the criteria %sed or to be %sed to rate the AHS# and an"
li)itation# .%alications or )aterial risks not addressed b" the ratin! a!enc"@a!encies1
(i) A f%ll description of how the iss%er will collect and )aintain re)ittances fro) the assets pendin!
distrib%tion to holders of the AHS# incl%din! the iss%er;s in$est)ent policies and the identit" of the
iss%er;s in$est)ent ad$isor# if an"1
(<) The plan for the )ana!e)ent and ad)inistration of the assets# asset pool and the AHS# incl%din!
the disposition of the foreclosed properties# if an"1 and
(k) The )anner of disposal of an" resid%al $al%e or asset with the SP0 after all obli!ations to
holders of AHS shall ha$e been settled.
GSV-73
SECTION #. Registration of Asset-Bace! Securities (ABS). - All AHS shall be re!istered with the
Co))ission in accordance with Sections 8 and 1( of the Sec%rities =e!%lation Code and its i)ple)entin!
r%les and re!%lations- /ro%ided# howe%er# That iss%ers of AHS fallin! %nder Sections A and 13 thereof shall
be re.%ired to le with the Co))ission# a notice# with a disclos%re state)ent.
SECTION 8. Approval. - The co))ission shall iss%e to an SPC or SPT the correspondin! order and per)it
to sell AHS onl" after co)pliance with all the re!istration re.%ire)ents and the appro$al of the Plan b" the
Co))ission.
SECTION $. "riginator is a Ban# Special Purpose Trust. - +n case the ori!inator of the assets is a
bank or an" other nancial inter)ediar" which %nder special laws is s%b<ect to the s%per$ision of the HSP#
or an entit" directl" related to said bank or other nancial inter)ediar"# or in the e$ent the SP0 is
constit%ted in the for) of an SPT# an endorse)ent b" the HSP of the Plan shall be re.%ired before it s
appro$al b" the Co))ission.
SECTION 1&. Po$ers of the SPE. - 0ach SP0 shall ha$e the power to-
(a) Accept the sale or transfer of assets1
(b) +ss%e and o/er the AHS for sale to in$estors1
(c) Bndertake on its own or thro%!h contracts with an" person# s%ch acti$ities as contained in the
appro$ed Plan1
(d) Create an" indebtedness or enc%)brances to defra" ad)inistrati$e or other necessar"
e&penses as specied in the Plan1 and
(e) Pa" o%t or in$est its f%nds in accordance with the Plan or as appro$ed b" the Co))ission.
SECTION 11. Restriction. - the SP0 shall not %ndertake an" acti$it" other than that contained in the
appro$ed Plan e&cept %pon a written appro$al of the Co))ission and the written consent of the holders of
the AHS representin! at least two-thirds ((@*) of the o%tstandin! a)o%nt of the AHS- /ro%ided# That in case
the ori!inator of the assets is a bank or na" other nancial inter)ediar" which %nder special laws is
s%b<ect to the s%per$ision of the HSP# or an entit" directl" or indirectl" related to said bank or other
nancial inter)ediar"# or in the e$ent the SP0 is constit%ted in the for) of an SPT# prior endorse)ent b"
the HSP is necessar".
SECTION 12. Transfer of Assets an! Security. - The transfer of the assets fro) the Dri!inator or Seller
to the SP0 shall be dee)ed to be a "tr%e sale" when it res%lts in the followin!-
(a) The transferred Assets are le!all" isolated and p%t be"ond the reach of the Dri!inator or Seller
and its Creditors1
(b) The transferee SP0 has the ri!ht to pled!e# )ort!a!e or e&chan!e those transferred Assets1
(c) The transferor relin.%ishes e/ecti$e control o$er the transferred assets1
(d) The transfer shall be e/ected b" either a sale# assi!n)ent or e&chan!e# in an" e$ent on a
witho%t reco%rse basis to the Dri!inator or Seller1
(e) The transferee shall ha$e the ri!ht to prots and disposition with respect to the assets1
(f) The transferor shall ha$e the ri!ht to reco$er the assets and the transferee shall not ha$e the
ri!ht to rei)b%rse)ent of the price or other consideration paid for the assets1 and
(!) The transferee shall %ndertake the risks associated with the assets. This shall not# howe$er#
pre$ent the transferor fro) !i$in! nor)al representations or warranties of the assets sold.
SECTION 1. %ith!ra$al of Registration. - +f the Co))ission nds that the Dri!inator or Seller has
%ndertaken the sec%riti'ation so as to seek the benets of this Act witho%t a tr%e intention to carr" it o%t#
the Co))ission shall withdraw or cancel the re!istration of the AHS and the re!istration of the SP0 as
iss%er# and ca%se the dissol%tion of the SPC or ter)ination of the SPT. The Dri!inator or Seller and as the
case )a" be# the tr%stees# shall pa" as ne an a)o%nt e.%al to the ta&es fro) which the SP0 has been
e&e)pted pl%s a s%rchar!e of twent"-$e percent ((2>) of the face $al%e of the AHS iss%ed# witho%t
pre<%dice to the penalties %nder this law and the Eational +nternal =e$en%e Code of 1AA7.
GSV-71
SECTION 1!. &nheritance an! Donor's Ta( Evasion. - +t shall be %nlawf%l for an" person# whether or
not it conte)plation of death# to ca%se directl"# the iss%ance# for the benet of another or others# of AHS
and a$ail of the ta& incenti$es !ranted b" this Act for the p%rpose of e$adin! the pa")ent of donor;s or
estate ta&es.
SECTION 1". Dissolution of the Special Purpose Entity (SPE). - The SP0 shall be dissol$ed in the
followin! cases-
(a) +t fail to accept the transfer of assets or iss%e AHS to in$estors within si& (5) )onths fro) the
date of appro$al of the Plan %nless e&tended b" the Co))ission1
(b) Jolders of at least two third ((@*) of the total a)o%nt of its AHS still o%tstandin! ha$e resol$ed
to dissol$e the SP0 and the appro$al of the Co))ission has been obtained1 in case the Dri!inator
of the assets is a bank or an" other nancial inter)ediar" which %nder special laws# is s%b<ect to
s%per$ision of the HSP# or an entit" directl" or indirectl" related to said bank or other nancial
inter)ediar"# or in the e$ent the SP0 is constit%ted in the for) of an SPT# an endorse)ent b" the
HSP shall be re.%ired prior to appro$al of the Co))ission1
(c) Conditions for dissol%tion that are specied in the Plan occ%r1 or
(d) The Co))ission orders dissol%tion in accordance with Section 1* and 1A.
SECTION 16. E)ects of Dissolution of SPE. - The SP0 and the re!istration of the AHS shall be
ter)inated# cancelled withdrawn in an" of the cases pro$ided for %nder the last precedin! section.
SECTION 1#. Appointment of an &nterim Representative. - +f the Co))ission nds that an SP0 has
no a%thori'ed representati$e to act on its behalf or s%ch persons cannot act for an" reason res%ltin! in the
interr%ption of its acti$ities p%rs%ant to the appro$ed Plan# the Co))ission shall ha$e the power to appoint
an" person or persons to act as interi) representati$e for the SP0. The interi) representati$e shall ha$e
the f%ll and e&cl%si$e a%thorit" to i)ple)ent the appro$ed Plan.
+n the e$ent of an appoint)ent of replace)ent of an interi) representati$e# the Co))ission shall post the
notice at the Co))ission;s o?ce and other its p%blication in at least two (() newspapers of national
circ%lation.
SECTION 18. Delivery of Property an! Recor!s it &nterim Representative. - 4here an interi)
representati$e has been appointed in accordance with Section 17.
(a) The directors# o?cers# or an" e)plo"ees of the SP0 shall take all appropriate steps to safe!%ard
the propert" and the benets of the holders of the AHS of the SP0 and shall deli$er the propert"
acco%nts# doc%)ents# and seals of the SP0 to the interi) representati$e1 and
(b) An" person who possesses propert" or doc%)ents of the SP0 shall notif" the representati$e of
s%ch possession.
SECTION 1$. *ailure to +ontinue Business. - The Co))ission shall order the dissol%tion of an SP0
%pon ndin! that the SP0 cannot contin%e to %ndertake its b%siness# and shall proceed to li.%idate the SP0
in accordance with the Corporation Code.
SECTION 2&. Po$er of &nspection. - The Co))ission shall ha$e the power to inspect or order the
Prod%ction of the records of the SP0.
ARTICLE III
THE SERVICER
SECTION 21. Duties. - The Ser$ice shall perfor) its d%ties p%rs%ant to the ter)s and conditions of the
ser$icin! a!ree)ent and s%ch other written instr%ctions as the SP0# the tr%stees or its interi)
representati$e )a" iss%e or in case-to-case basis. Collections )ade b" the Ser$icer shall be re)itted
pro)ptl" to the SP0 or as )a" be a!reed %pon the parties in the ser$icin! a!ree)ent# b%t in no case shall
be re)ittance period be lon!er than one (1) )onth.
SECTION 22. Reports. - The Ser$icer shall prepare periodic reports as )a" be re.%ired b" the SP0# the
tr%stee or its interi) representati$e within thirt" (*3) da"s# incl%din! reports of an" borrower or obli!ator
which fails to pa" its debt or obli!ation at )at%rit" date or an" ad$erse de$elop)ent that )a" be a/ect
the collectibilit" of an" loan acco%nt or recei$able co)prisin! the asset pool.
GSV-7(
SECTION 2. E(tent of Authority. - The Ser$icer shall ha$e s%ch a%thorit" as is e&pressl" stated in the
ser$icin! a!ree)ent and %nless otherwise specicall" pro$ided therein# s%ch a%thorit" shall enco)pass
the !eneral powers of ad)inistration. The Ser$icer shall ha$e no a%thorit" to wai$e penalties and char!es
e&cept with the written a%thorit" fro) the Hoard of SP0# the tr%stee or the interi) representati$e# sho%ld
one be appointed
SECTION 2!. ,ualifcations. - The Ser$icer shall be a corporation d%l" incorporated %nder Philippine law#
with a )ini)%) a%thori'ed capitali'ation of Ten )illion pesos (P13#333#33.33) or s%ch hi!her a)o%nts as
the Co))ission )a" prescribe. +t shall be independent of the SPC or the tr%stee and shall not share
co))on ownership# o?cers# or directors with the SPC or the tr%stees. The Dri!inator or Seller )a" act as
the Ser$icer as )a" be appro$ed b" the Co))ission or the HSP# as the case )a" be.
SECTION 2". Stan!ar! of +on!uct. - The Ser$icer shall act with %t)ost !ood faith and shall perfor) its
obli!ations %nder the ser$icin! a!ree)ent with the d%e dili!ence of a !ood father of a fa)il".
SECTION 26. Penalties. - Hreach b" the Ser$icer of its obli!ations arisin! fro) the fail%re to abide b" the
standard of cond%ct set forth in the precedin! section shall s%b<ect the Ser$icer to the penalt" of
re$ocation of its corporate re!istration and a ne of not less than Dne 6illion pesos (P1#333#333.33) and
shall s%b<ect its o?cers and e)plo"ees responsible for s%ch nonco)pliance with the standard of cond%ct
referred to abo$e# to a penalt" of i)prison)ent for not )ore than $e (2) "ears and a ne of not less than
Dne J%ndred Tho%sand pesos (133#333.33). Hreach arisin! fro) bad faith or !ross ne!li!ence shall s%b<ect
the Ser$icer to re$ocation of its corporate re!istration and a ne of not less than :i$e )illion pesos
(P2#333#333.33) and shall s%b<ect the o?cers and e)plo"ees responsible for s%ch breach to a penalt" of
i)prison)ent for not )ore than si& (5) "ears and one (1) da" %p to a )a&i)%) of twent" ((3) "ears and a
ne of not less than :i$e h%ndred tho%sand pesos (P233#333.33).
ARTICLE IV
TA, AND OTHER RELATED ISS(ES
SECTION 2#. income Ta(ation of Special Purpose Entity. - The SP0 in the for) of an SPC shall be
s%b<ect to inco)e ta& %nder Section (7(a)# Chapter +V of the Eational +nternal =e$en%e Code of 1AA7. An
SP0 constit%ted as an SPT shall be s%b<ect to inco)e ta& in accordance with the pro$isions of Section 51#
Chapter K of the sa)e Code.
SECTION 28. Transfer of Assets. - The sale or transfer of assets to the SP0# which incl%des sale or
transfer of an" and all sec%rit" interest thereto# it )ade in accordance with the Plan shall be e&e)pted
fro) $al%e-added ta& (VAT) and doc%)entar" sta)p ta& (9ST)# or an" other ta&es i)posed in lie% thereof.
0&cept for re!istration fees with the Co))ission# all applicable re!istration and annotation fees to be paid#
related or incidental to the transfer of assets# or the sec%rit" interest thereto# shall be ft" percent (23>)
of the applicable re!istration and annotation fees.
The transfer of assets b" dation in pa")ent (dacion en pa!o) b" the obli!or in fa$or of an SP0 shall not be
s%b<ect to capital !ains ta& as pro$ided %nder Section (7 (d)(2) of the Eational +nternal =e$en%e Code of
1AA7.
SECTION 2$. &ssuance an! Transfer of Securities. - The ori!inal iss%ance of AHS and other sec%rities
related solel" to s%ch sec%riti'ation transaction# s%ch as# b%t not li)ited to# seller;s e.%it"# s%bordinated
debt instr%)ents p%rchased b" the ori!inator# and other related for)s of credit enhance)ent shall be
e&e)pt fro) VAT# or an" other ta&es i)posed in lie% thereof# b%t s%b<ect to 9ST. All secondar" trades and
s%bse.%ent transfers of AHS# incl%din! all for)s of credit enhance)ent in s%ch instr%)ents# shall be
e&e)pt fro) 9ST and VAT# or an" other ta&es i)posed in lie% thereof.
SECTION &. -on-+lassifcation of SPE as a Ban. ,uasi-Ban or *inancial &nterme!iary. - The
SP0# created p%rs%ant to a Plan# shall not be classied as a ban# .%asi-bank or nancial inter)ediar" %nder
the pro$isions of the Eew Central Hank Act# the General Hankin! Caw and the Eational +nternet =e$en%e
Code of 1AA7# and shall not be s%b<ect to the !ross receipts ta& (G=T) or an" other ta& i)posed in lie%
thereof.
SECTION 1. Securities not to /e +ategori0e! as Deposit Su/stitutes. - The AHS iss%ed b" an SP0
p%rs%ant to the Plan appro$ed b" the Co))ission shall not be considered as deposit s%bstit%tes %nder the
laws )entioned in Section *3 hereof- /ro%ided# howe%er# That for p%rposes of ta&ation# the "ield for the
AHS shall be s%b<ect to a twent" percent ((3>) nal withholdin! ta&# e&cept those held b" ta&-e&e)pt
in$estors.
SECTION 2. Re-transfer of Assets. - 4here the i)ple)entation of the Plan or the pro$ision of this Act
re.%ires or pro$ides a transfer of the assets and collateral back to the Dri!inator or Seller# then the
pro$isions of Section (8 shall appl" to s%ch transfer.
GSV-7*
SECTION . &ncentives for Securiti0ation. - +n order to pro)ote the sec%riti'ation of the )ort!a!e
and ho%sin! related recei$ables of the !o$ern)ent ho%sin! a!encies as )a" be deter)ined b" the
Jo%sin! and Brban 9e$elop)ent Coordinatin! Co%ncil (JB9CC) and the 9epart)ent of :inance (9D:)# the
"ield or inco)e of the in$estor fro) an" low-cost or sociali'ed ho%sin!-related AHS shall be e&e)pt fro)
inco)e ta&.
SECTION !. %aiver of Rights. - :or p%rposes of sec%riti'ation p%rs%ant to this Act# the b%"er of real
estate on install)ent pa")ents )a" a!ree to wai$e his ri!hts %nder =ep%blic Act Eo. 522(# the pro$ision
of Section 7 of the said notwithstandin!.
ARTICLE V
SECONDAR* MORTGAGE INSTIT(TION
SECTION ". Registration of Secon!ary 1ortgage &nstitution (S1&). - An S6+# which shall be
pri)aril" responsible in pro$idin! li.%idit" )echanis) to pri)ar" )ort!a!e lenders@holders as well as in
de$elopin! a secondar" )arket for )ort!a!e and ho%sin!-related AHS# shall also be re!istered with the
Co))ission.
SECTION 6. Registration of Business an! "perational Plan. - The S6+ shall also re!ister its b%siness
and operational plan with the Co))ission and shall# as a )ini)%)# be s%b<ect to the sa)e disclos%re
re.%ire)ents as SPCs.
SECTION #. Promulgation of Rules. - The Co))ission# in cons%ltation with the HSP and the +ns%rance
Co))ission (+C)# shall pro)%l!ate r%le re!ardin! the ownership# or!ani'ation# capitali'ation and opertion
of the S6+.
+n pro)%l!atin! s%ch r%les# the Co))ission shall consider the si'e of the asset pools to be held b" the
S6+# the a)o%nt of debt to be iss%ed b" it# the e&tent of its operation and the powers of the S6+ specied
%nder this Act.
SECTION 8. Po$ers of the S1&. - :or p%rposes of sec%riti'ation %nder this Act and p%rs%ant to the Plan
s%b)itted to the Co))ission# the S6+ )a" perfor) an" or all of the followin!-
(a) 4holesale p%rchase of residential )ort!a!es and ho%sin!-related contract recei$ables1
(b) H%" and sell residential )ort!a!e and ho%sin!-related AHS1
(c) Pro$ide loans to pri)ar" lendin! instit%tions a!ainst residential )ort!a!es1
(d) +ss%e ho%sin!-related AHS thro%!h an SP0# and iss%e bonds and other debt instr%)ents1
(e) Perfor) ancillar" f%nctions incl%din!# b%t not li)ited to# title ins%rance# thro%!h a s%bsidiar"#
wholl" or partiall" owned b" an S6+# and loan ser$icin!1 and
(f) Perfor) s%ch other f%nctions as the Co))ission )a" deter)ine necessar" to )obili'e and
channel f%nds fro) the capital )arkets to the )ort!a!e and ho%sin! nance sector.
SECTION $. S1& +apitali0ation an! "rgani0ational Re2uirements. - An" S6+ established for the
ho%sin! sector shall be a stock corporation and shall ha$e a )ini)%) initial paid-%p capital of Two billion
pesos (P(#333#333#333.33)- /ro%ided# That the total obli!ation of the S6+# incl%din! both act%al and
contin!ent obli!ations# shall not e&ceed fteen (12) ti)es its paid-%p capital- /ro%ided# further# That the
act%al obli!ations of the S6+ shall not e&ceed ten (13) ti)es its paid-%p capital- /ro%ided# furthermore#
That the ratios indicated herein )a" be ad<%sted b" the Co))ission with appro$al of the 9D: and HSP
%pon a showin! that the conditions of the secondar" and pri)ar" )arkets and the nancial $iabilit" of the
S6+ warrant s%ch ad<%st)ent-/ro%ided# Finally# That the in$est)ent of nancial entities in the S6+ shall be
s%b<ected to and be )ade to co)pl" with r%les and re!%lations of the appropriate re!%lator" a!enc".
Go$ern)ent nancial instit%tions and !o$ern)ent-owned or-controlled corporations# )a" collecti$el" hold
and own %p to a )a&i)%) of thirt" percent (*3>) of the S6+;s capital- /ro%ided# That s%ch in$est)ent
does not conLict with their e&istin! charters
A !o$ern)ent nancial instit%tion )a" in$est %p to a )a&i)%) of ten percent (13>) of its total in$estible
f%nds in ho%sin!-related assets or $e percent (2>) in non-ho%sin! related assets- /ro%ided# That s%ch
in$est)ent does not e&ceed $e percent (2>) of the total a)o%nt of each AHS iss%e.
GSV-7,
4ithin ten (13) "ears of its incorporation# the S6+ shall o/er and list at least twent" percent ((3>) of its
co))on shares in the stock e&chan!e# which period shall be e&tendible onl" %pon appro$al of the
Co))ission in instances where the lace of nancial $iabilit" of the S6+ warrants s%ch e&tension.
SECTION !&. Prohi/ite! Activities of the S1&. - The S6+ shall be prohibited fro)-
(a) Dri!inatin! or nancin! indi$id%al )ort!a!e loans1
(b) Pro$idin! loans to other parties en!a!ed in a b%siness other than that appro$ed in the Plan
s%b)itted to the Co))ission- and
(c) Pro$idin! capital e.%it" to other co)panies.
SECTION !1. E(tension of Benefts to the S1&. - The benets pro$ided to the transactions entered
into b" the SPCs %nder Sections (8 to ** of this Act shall also be !ranted to the sa)e transactions entered
into b" the S6+s for p%rposes of sec%rit'ation in accordance with the pro$isions of this Act.
SECTION !2. Dissolution of the S1&. - The Co))ission shall order the dissol%tion and li.%idation of the
S6+ %pon a ndin! that it1
(a) Cannot contin%e to %ndertake its b%siness1 or
(b) +s not operation acti$el"1 or
(c) +s en!a!in! in acti$ities that conLict with its ob<ecti$es as an S6+1 or
(d) Jas f%llled a condition for dissol%tion specied in its Articles of +ncorporation.
ARTICLE VI
RATING S*STEM
SECTION !. Rating ABS. - Eo AHS shall be iss%ed %nless s%ch AHS has been rated b" a d%l" accredited
credit ratin! a!enc".
SECTION !!. +re!it Rating Agency. - 0$er" credit ratin! a!enc" which now e&ists or which )a"
hereafter be for)ed shall be s%b<ect to the pro$isions of this Act.
SECTION !". Accre!itation of +re!it Rating Agency. - Eo credit ratin! a!enc" shall co))ence rate-
)akin! operations p%rs%ant to this Act %ntil it shall ha$e obtained an accreditation fro) the Co))ission
%nder s%ch r%les and re!%lations as the Co))ission )a" dee) appropriate.
SECTION !6. E(amination of +re!it Rating Agencies. - Credit ratin! a!encies shall be s%b<ect to
e&a)ination b" the Co))ission as the latter )a" dee) warranted- Pro$ided# That the Co))ission shall
cond%ct an e&a)ination of the credit ratin! a!encies at least once e$er" three (*) "ears.
SECTION !#. -oncompliance of Accre!ite! Rating Agencies. - The Co))ission )a" s%spend or
re$oke the accreditation !i$en to an" credit ratin! a!enc" which fails to co)pl" with the Co))ission;s
lawf%l order within the ti)e li)ited b" s%ch order# or an" e&tension thereof which the Co))ission )a"
!rant.
ARTICLE VII
PENAL PROVISIONS
SECTION !8. Penalties. - An" person who $iolates an" of the pro$isions of this Act# or the r%les and
re!%lations pro)%l!ated b" the Co))ission %nder a%thorit" hereof# or an" person who# in a re!istration
state)ent# notice# or Plan led %nder this Act# )akes an" %ntr%e state)ent of a )aterial fact or o)its to
state an" )aterial fact re.%ired to be stated therein or necessar" to )ake the state)ents therein not
)isleadin!# shall# %pon con$iction# s%/er a ne of not less than :ift" tho%sand pesos (P23#333.33) nor
)ore than :i$e )illion pesos (P2#333.33) or i)prison)ent of not less than si& (5) "ears and one (1) da" nor
)ore than twent"-one ((1) "ears# or both in the discretion of the co%rt. +f the o/ender is corporation#
partnership or association or other <%ridical entit"# the penalt" )a" in the discretion of the co%rt be
i)posed %pon s%ch <%ridical entit" %pon the o?cer or o?cers of the corporation# partnership# association
or entit" responsible fro the $iolation# and if s%ch o?cer is an alien# he shall in addition to the penalties
prescription prescribed# be deported witho%t f%rther proceedin!s after ser$ice of sentence.
ARTICLE VIII
MISCELLANEO(S PROVISIONS
GSV-72
SECTION !$. &mplementing Rules an! Regulations (&RR). - The Co))ission# in coordination with the
HSP# 9D: and the +C# shall pro)%l!ate the i)ple)entin! r%les and re!%lations which shall be s%b)itted to
the Con!ressional D$ersi!ht Co))ittee which shall re$iew# re$ise and appro$e the sa)e- Pro$ided# That
the Co))ission HSP# 9D: and the +C )a" contin%e to iss%e separate re!%lations that will appl" e&cl%si$el"
to the instit%tions %nder their respecti$e <%risdiction# consistent with the +== as appro$ed b" the
Con!ressional D$ersi!ht Co))ittee.
SECTION "&. +ongressional "versight +ommittee. - There is hereb" created a Con!ressional
D$ersi!ht Co))ittee co)posed of se$en (7) )e)bers fro) the Senate and se$en (7) )e)bers fro) the
Jo%se of the =epresentati$es. The )e)bers fro) the Senate shall be appointed b" the Senate President
with at least two (() Senators representin! the 6inorit". The )e)bers fro) the Jo%se of =epresentati$es
shall also appointed b" the Speaker with at least two (() )e)bers representin! the 6inorit". After the
D$ersi!ht Co))ittee has appro$ed the +==# it shall thereafter beco)e f%nct%s o?cio# and therefore cease
to e&ist.
SECTION "1. Repeating +lause. - All laws# e&ec%ti$e orders# r%les and re!%lations# and parts thereof
which are inconsistent with this Act are hereb" repealed or a)ended accordin!l".
SECTION "2. Separa/ility +lause. - +f for an" reason an" article or pro$ision of this Act or an" portion
therefore or application of s%ch article# pro$ision# or portion thereof to an" person# !ro%p# or circ%)stance
is declared in$alid or %nconstit%tional# the re)ainder of this Act shall not be a/ected b" s%ch decision.
SECTION ". E)ectivity +lause. - This Act shall take e/ect fteen (12) da"s after its co)plete
p%blication in the D?cial Ga'ette or in at least two (() newspapers of !eneral circ%lation# whiche$er co)es
earlier.
Appro$ed#
FRAN+LIN DRILON
President of the Senate
/OSE DE VENECIA /R.
Speaker of the Jo%se of
=epresentati$es
This Act which is a consolidation of Jo%se Hill Eo. ,,2* and Senate Hill Eo. (3A2 was nall" passed b" the
Jo%se of =epresentati$es and the Senate on Oan%ar" (8# (33, and Oan%ar" (A# (33,# respecti$el".
OSCAR G. *ABES
Secretar" of Senate
ROBERTO P. NA%ARENO
Secretar" General
Jo%se of =epresenati$es
Appro$ed- 6arch 1A# (33,
GLORIA MACAPAGAL-ARRO*O
/resident of the /hilippines
GSV-75

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