GENERAL BANKING NOTES Sheila May M.

Martinez 1st homework Section 1-11 General Banking Act LAw

the lending of funds obtained in the form of deposits. 3.2. Banks shall be classified into: (a) Universal banks;

CHAPTER I TITLE AND CLASSIFICATION OF BANKS Section 1. Title. The short title of this Act shall be The General Banking Law of 2000." (1a) Sec. 2. Declaration Of Policy. - The State recognizes the vital role of banks providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. Sec. 3. Definition and Classification of Banks. 3.1. "Banks" shall refer to entities engaged in
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(b) Commercial banks; (c) Thrift banks, composed of: (i) Savings and mortgage banks; (ii) Stock savings and loan associations; and (iii) Private development banks, as defined in the Republic Act No. 7906 (hereafter the Thrift Banks Act ); (d) (e) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act"); Cooperative banks, as defined in Republic Act No 6938 (hereafter the"Cooperative Code"); Islamic banks as defined in Republic Act No. 6848, otherwise known as theCharter of Al Amanah Islamic Investment Bank of the

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Philippines; and (g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. CHAPTER II AUTHORITY OF THE BANGKO SENTRAL Sec. 4. Supervisory Powers. The operations and activities of banks shall be subject to supervision of the Bangko Sentral. Supervision shall include the following: 4.1. The issuance of rules of, conduct or the establishment standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied; 4.2.The conduct of examination to determine compliance with laws and regulations if the circumstances so warrant as determined by the Monetary Board;
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4.3. Overseeing to ascertain that laws and regulations are complied with; 4.4. Regular investigation which shall not be oftener than once a year from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be immediately addressed; 4.5. 4.6. Inquiring into the solvency and liquidity of the institution; or Enforcing prompt corrective action. The Bangko Sentral shall also have supervision over the operations of and exercise regulatory powers over quasi-banks, trust entities and other financial institutions which under special laws are subject to Bangko Sentral supervision. . For the purposes of this Act, quasibanks shall refer to entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or

acceptance of deposit substitutes as defined in Section 95 of Republic Act No. 7653 (hereafter the New Central Bank Act) for purposes of re-lending or purchasing of receivables and other obligations. Sec.5. Policy Direction; Ratios, Ceilings and Limitations. The Bangko Sentral shall provide policy direction in the areas of money, banking and credit. For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations, or other forms of regulation on the different types of accounts and practices of banks and quasibanks which shall, to the extent feasible, conform to internationally accepted standards, including of the Bank for International Settlements (BIS). The Monetary Board may exempt particular categories of transactions from such ratios, ceilings, and limitations, but not limited to exceptional cases or to enable a bank or quasi-bank under rehabilitation or during a merger or consolidation to continue in business, with safety to its creditors, depositors and the general public.

Sec. 6. Authority to Engage in Banking and Quasi-Banking Functions. - No person or entity shall engage in banking operations or quasi-banking functions without authority from the Bangko Sentral: Provided, however, That an entity authorized by the Bangko Sentral to perform universal or commercial banking functions shall likewise have the authority to engage in quasi-banking functions. The determination of whether a person or entity is performing banking or quasi-banking functions without Bangko Sentral authority shall be decided by the Monetary Board. To resolve such issue, the Monetary Board may; through the appropriate supervising and examining department of the Bangko Sentral, examine, inspect or investigate the books and records of such person or entity. Upon issuance of this authority, such person or entity may commence to engage in banking operations or quasi-banking function and shall continue to do so unless such authority is sooner surrendered, revoked, suspended or annulled by the Bangko Sentral in accordance with this Act or other special laws.
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or controlled by the bank. The department head and the examiners of the appropriate supervising and examining department are hereby authorized to administer oaths to any such person, employee, officer, or director of any such entity and to compel the presentation or production of such books, documents, papers or records that are reasonably necessary to ascertain the facts relative to the true functions and operations of such person or entity. Failure or refusal to comply with the required presentation or production of such books, documents, papers or records within a reasonable time shall subject the persons responsible therefore to the penal sanctions provided under the New Central Bank Act. Persons or entities found to be performing banking or quasi-banking functions without authority from the Bangko Sentral shall be subject to appropriate sanctions under the New Central Bank Act and other applicable laws. Sec.7. Examination by the Bangko Sentral. The Bangko Sentral shall, when examining a bank, have the authority to examine an enterprise which is wholly or majority-owned
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CHAPTER III ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS, QUASI-BANKS AND ENTITIES

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Sec.8. Organization. The Monetary Board may authorize the organization of a bank or quasi-bank subject to the following conditions: 8.1 That the entity is a stock corporation; 8.2 That its funds are obtained from the public, which shall mean twenty (20) or more persons; and 8.3 That the minimum capital requirements prescribed by the Monetary Board for each category of banks are satisfied. No new commercial bank shall be established within three (3) years from the effectivity of this Act. In the exercise of the authority granted herein, the Monetary Board shall take into consideration their capability in

terms of their financial resources and technical expertise and integrity. The bank licensing process shall incorporate an assessment of the bank s ownership structure, directors and senior management, its operating plan and internal controls as well as its projected financial condition and capital base. Sec.9. Issuance of Stocks. The Monetary Board may prescribe rules and regulations on the types of stock a bank may issue, including the terms thereof and rights appurtenant thereto to determine compliance with laws and regulations governing capital and equity structure of banks; Provided, That banks shall issue par value stocks only. Sec.10. Treasury Stocks. No bank shall purchase or acquire shares of its own capital stock or accept its own shares as a security for a loan, except when authorized by the Monetary Board: Provided, That in every case the stock so purchased or acquired shall, within six (6) months from the time of its purchase or acquisition, be sold or disposed of at a public or private sale.
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Sec.11. Foreign Stockholdings Foreign individuals and non-bank corporations may own or control up to forty percent (40%) of the voting stock of a domestic bank. This rule shall apply to Filipinos and domestic nonbank corporations. The percentage of foreign-owned voting stocks in a bank shall be determined by the citizenship of the individual stockholders in that bank. The citizenship of the corporation which is a stockholder in a bank shall follow the citizenship of the controlling stockholders of the corporation, irrespective of the place of incorporation. Article 12 of the Philippine ConstitutionNATIONAL ECONOMY AND PATRIMONY Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage

as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos. In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities. Section 95 of the New Central Bank Act Definition of Deposit Substitutes. The term "deposit substitutes" is defined as an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of relending or purchasing of receivables and other obligations.
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These instruments may include, but need not be limited to, bankers acceptances, promissory notes, participations, certificates of assignment and similar instruments with recourse, and repurchase agreements. The Monetary Board shall determine what specific instruments shall be considered as deposit substitutes for the purposes of Section 94 of this Act: Provided, however, That deposit substitutes of commercial, industrial and other non-financial companies for the limited purpose of financing their own needs or the needs of their agents or dealers shall not be covered by the provisions of Section 94 of this Act. Section 22 of the National Internal Revenue Code SEC. 22 Definitions - When used in this Title: (A) The term "person" means individual, a trust, estate or corporation an

(B) The term "corporation" shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participacion), association, or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating consortium agreement under a service contract with the Government "General professional partnerships" are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business (C) The term "domestic", when applied to a corporation, means created or organized in the Philippines or under its laws (D) The term "foreign", when applied to a corporation, means a corporation which is not domestic

(E) The term "nonresident citizen" means: (1)A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein. (2)A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis. (3) A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. (4) A citizen who has been previously considered as nonresident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a nonresident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the
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Philippines. (5) The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be for purpose of this Section. (F) The term "resident alien" means an individual whose residence is within the Philippines and who is not a citizen thereof. (G) The term "nonresident alien" means an individual whose residence is not within the Philippines and who is not a citizen thereof. (H) The term "resident foreign corporation" applies to a foreign corporation engaged in trade or business within the Philippines. (I) The term 'nonresident foreign corporation' applies to a foreign corporation not engaged in trade or business within the Philippines.

(J) The term "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator or any person acting in any fiduciary capacity for any person. (K) The term "withholding agent" means any person required to deduct and withhold any tax under the provisions of Section 57. (L) The term "shares of stock" shall include shares of stock of a corporation, warrants and/or options to purchase shares of stock, as well as units of participation in a partnership (except general professional partnerships), joint stock companies, joint accounts, joint ventures taxable as corporations, associations and recreation or amusement clubs (such as golf, polo or similar clubs), and mutual fund certificates. (M) The term "shareholder" shall include holders of a share/s of stock, warrant/s and/or option/s to purchase shares of stock of a corporation, as well as a holder of a unit of participation in a partnership (except general professional partnerships) in a joint stock company, a joint account, a taxable joint venture, a member of an association,
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recreation or amusement club (such as golf, polo or similar clubs) and a holder of a mutual fund certificate, a member in an association, joint-stock company, or insurance company. (N) The term "taxpayer" means any person subject to tax imposed by this Title. (O) The terms "including" and "includes", when used in a definition contained in this Title, shall not be deemed to exclude other things otherwise within the meaning of the term defined. (P) The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income is computed under this Title. 'Taxable year' includes, in the case of a return made for a fractional part of a year under the provisions of this Title or under rules and regulations prescribed by the Secretary of Finance, upon recommendation of the commissioner, the period for which such return is made.

(Q) The term "fiscal year" means an accounting period of twelve (12) months ending on the last day of any month other than December. (R) The terms "paid or incurred" and 'paid or accrued' shall be construed according to the method of accounting upon the basis of which the net income is computed under this Title. (S) The term "trade or business" includes the performance of the functions of a public office. (T) The term "securities" means shares of stock in a corporation and rights to subscribe for or to receive such shares. The term includes bonds, debentures, notes or certificates, or other evidence or indebtedness, issued by any corporation, including those issued by a government or political subdivision thereof, with interest coupons or in registered form. (U) The term "dealer in securities" means a merchant of stocks or securities, whether
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an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and the resale thereof to customers; that is, one who, as a merchant, buys securities and re-sells them to customers with a view to the gains and profits that may be derived therefrom. (V) The term "bank" means every banking institution, as defined in Section 2 of Republic Act No. 337, as amended, otherwise known as the General banking Act. A bank may either be a commercial bank, a thrift bank, a development bank, a rural bank or specialized government bank. (W) The term "non-bank financial intermediary" means a financial intermediary, as defined in Section 2(D)(C) of Republic Act No. 337, as amended, otherwise known as the General Banking Act, authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities. (X) The term "quasi-banking activities" means borrowing funds from twenty (20) or more personal or corporate lenders at any one time, through the
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issuance, endorsement, or acceptance of debt instruments of any kind other than deposits for the borrower's own account, or through the issuance of certificates of assignment or similar instruments, with recourse, or of repurchase agreements for purposes of relending or purchasing receivables and other similar obligations: Provided, however, That commercial, industrial and other non-financial companies, which borrow funds through any of these means for the limited purpose of financing their own needs or the needs of their agents or dealers, shall not be considered as performing quasi-banking functions. (Y) The term "deposit substitutes" shall mean an alternative from of obtaining funds from the public (the term 'public' means borrowing from twenty (20) or more individual or corporate lenders at any one time) other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrowers own account, for the purpose of relending or purchasing of receivables and other obligations, or financing their own needs or the needs of their agent or dealer.

These instruments may include, but need not be limited to bankers' acceptances, promissory notes, repurchase agreements, including reverse repurchase agreements entered into by and between the Bangko Sentral ng Pilipinas (BSP) and any authorized agent bank, certificates of assignment or participation and similar instruments with recourse: Provided, however, That debt instruments issued for interbank call loans with maturity of not more than five (5) days to cover deficiency in reserves against deposit liabilities, including those between or among banks and quasibanks, shall not be considered as deposit substitute debt instruments. (Z) The term "ordinary income" includes any gain from the sale or exchange of property which is not a capital asset or property described in Section 39(A)(1). Any gain from the sale or exchange of property which is treated or considered, under other provisions of this Title, as 'ordinary income' shall be treated as gain from the sale or exchange of property which is not a capital asset as defined in Section 39(A)(1).
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The term 'ordinary loss' includes any loss from the sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of property which is treated or considered, under other provisions of this Title, as 'ordinary loss' shall be treated as loss from the sale or exchange of property which is not a capital asset. (AA) The term "rank and file employees" shall mean all employees who are holding neither managerial nor supervisory position as defined under existing provisions of the Labor Code of the Philippines, as amended. (BB) The term "mutual fund company" shall mean an open-end and close-end investment company as defined under the Investment Company Act. (CC) The term "trade, business or profession" shall not include performance of services by the taxpayer as an employee. (DD) The term "regional or area

headquarters" shall mean a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets. (EE) The term "regional operating headquarters" shall mean a branch established in the Philippines by multinational companies which are engaged in any of the following services: general administration and planning; business planning and coordination; sourcing and procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communications; and business development. (FF) The term "long-term deposit or investment certificates" shall refer to
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certificate of time deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments with a maturity period of not less than five (5) years, the form of which shall be prescribed by the Bangko Sentral ng Pilipinas (BSP) and issued by banks only (not by nonbank financial intermediaries and finance companies) to individuals in denominations of Ten thousand pesos (P10,000) and other denominations as may be prescribed by the BS. Section 3 of the Thrift Banks Act of 1995 Sec. 3. Definition of Terms. For purposes of implementing this Act, the following definitions shall apply: (a) "Thrift banks" shall include savings and mortgage banks, private development banks, and stock savings and loans associations organized under existing laws, and any banking corporation that may be organized for the following purposes: (1) Accumulating the savings of depositors and investing them, together with capital loans secured by bonds, mortgages in

real estate and insured improvements thereon, chattel mortgage, bonds and other forms of security or in loans for personal or household finance, whether secured or unsecured, or in financing for homebuilding and home development; in readily marketable and debt securities; in commercial papers and accounts receivables, drafts, bills of exchange, acceptances or notes arising out of commercial transactions; and in such other investments and loans which the Monetary Board may determine as necessary in the furtherance of national economic objectives (2) Providing short-term working capital, medium- and long-term financing, to businesses engaged in agriculture, services, industry and housing; and (3)Providing diversified financial and allied services for its chosen market and constituencies specially for small and medium enterprises and individuals. (b) "Monetary Board" shall mean the Monetary Board of the Bangko Sentral ng Pilipinas. (c) "Bangko Sentral" shall refer to the Bangko
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Sentral ng Pilipinas created under Republic Act No. 7653. Section 3 of Rural Bank Act of 1992 Sec. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines shall formulate the necessary rules and regulations governing the establishment and operation of farmers and merchants, or to cooperatives of such farmers and merchants and, in general, to the people of the rural communities, and to supervise the operation of such banks. Definition of a Cooperative Bank under Cooperative Bank Law of 2008 as amended by RA 9520 Cooperative Bank is one organized for the primary purpose of providing a wide range of financial services to cooperatives and their members; ART. 23. Type and Categories of Cooperatives. (1) Types of Cooperatives Cooperatives may fall under any of the

following types: "(a) Credit Cooperative is one that promotes and undertakes savings and lending services among its members. It generates a common pool of funds in order to provide financial assistance to its members for productive and provident purposes; "(b) Consumers Cooperative is one of the primary purpose of which is to procure and distribute commodities to members and non-members; "(c) Producers Cooperative is one that undertakes joint production whether agricultural or industrial. It is formed and operated by its members to undertake the production and processing of raw materials or goods produced by its members into finished or processed products for sale by the cooperative to its members and nonmembers. Any end product or its derivative arising from the raw materials produced by its members, sold in the name and for the account of the cooperative, shall be deemed a product
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of the cooperative and its members; "(d) Marketing Cooperative is one which engages in the supply of production inputs to members and markets their products;cralaw "(e) Service Cooperative is one which engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services;cralaw "(f) Multipurpose Cooperative is one which combines two (2) or more of the business activities of these different types of cooperatives;cralaw "(g) Advocacy Cooperative is a primary cooperative which promotes and advocates cooperativism among its members and the public through socially-oriented projects, education and training, research and communication, and other similar activities to reach out to its intended beneficiaries;cralaw

"(h) Agrarian Reform Cooperative is one organized by marginal farmers majority of which are agrarian reform beneficiaries for the purpose of developing an appropriate system of land tenure, land development, land consolidation or land management in areas covered by agrarian reform;cralaw "(i) Cooperative Bank is one organized for the primary purpose of providing a wide range of financial services to cooperatives and their members;cralaw "(j) Dairy Cooperative is one whose members are engaged in the production of fresh milk which may be processed and/or marketed as dairy products;cralaw "(k) Education Cooperative is one organized for the primary purpose of owning and operating licensed educational institutions notwithstanding the provisions of Republic Act No. 9155, otherwise known as the Governance of Basic Education Act of 2001;cralaw
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"(l) Electric Cooperative is one organized for the primary purposed of undertaking power generations, utilizing renewable energy sources, including hybrid systems, acquisition and operation of subtransmission or distribution to its household members;cralaw "(m) Financial Service Cooperative is one organized for the primary purpose of engaging in savings and credit services and other financial services;cralaw "(n) Fishermen Cooperative is one organized by marginalized fishermen in localities whose products are marketed either as fresh or processed products;cralaw "(o) Health Services Cooperative is one organized for the primary purpose of providing medical, dental and other health services;cralaw "(p) Housing Cooperative is one organized to assist or provide access to housing for the benefit of its regular

members who actively participate in the savings program for housing. It is coowned and controlled by its members;cralaw "(q) Insurance Cooperative is one engaged in the business of insuring life and poverty of cooperatives and their members;cralaw "(r) Transport Cooperative is one which includes land and sea transportation, limited to small vessels, as defined or classified under the Philippine maritime laws, organized under the provisions of this Code;cralaw "(s) Water Service Cooperative is one organized to own, operate and manage waters systems for the provision and distribution of potable water for its members and their households;cralaw "(t) Workers Cooperative is one organized by workers, including the self-employed, who are at same time the members and owners of the enterprise. Its principal purpose is to provide employment and business
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opportunities to its members and manage it in accordance with cooperative principles; andcralaw "(u) Other types of cooperative as may be determined by the Authority. "(2) Categories of Cooperative Cooperatives shall be categorized according to membership and territorial considerations as follows: "(a) In terms of membership, cooperative shall be categorized into: "(i) Primary The members of which are natural persons;cralaw "(ii) Secondary The members of which are primaries; andcralaw "(iii) Tertiary The members of which are secondary cooperatives; and "(b) In terms of territory, cooperatives shall be categorized according to areas of operations which may or may not coincide with the political subdivisions

of the country. "ART. 24. Functions of a Federation of Cooperatives. A federation of cooperatives shall undertake the following functions: "(a) To carry on any cooperative enterprise authorized under Article 6 that complements augments, or supplements but does not conflict, complete with, nor supplant the business or economic activities of its members; "(b) To carry on, encourage, and assist educational and advisory work relating to its member cooperatives; "(c) To render services designed to encourage simplicity, efficiency, and economy in the conduct of the business of its member cooperatives and to facilitate the implementation of their bookkeeping, accounting, and other systems and procedures; "(d) To print, publish, and circulate any newspaper or other publication in the interest of its member cooperatives and
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enterprises; "(e) To coordinate and facilitate the activities of its member cooperatives; "(f) To enter into joint ventures with national or international cooperatives of other countries in the manufacture and sale of products and/or services in the Philippines and abroad; and "(g) To perform such other functions as may be necessary to attain its objectives. "A federation of cooperatives may be registered by carrying out the formalities for registration of a cooperative. "Registered cooperatives may organize a federation according to the type of business activity engaged in by the cooperatives. Section 3 of the CHARTER OF THE ALAMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINES Republic Act No. 6848- AN ACT PROVIDING FOR THE 1989 CHARTER OF THE AL-

AMANAH ISLAMIC INVESTMENT BANK OF THE PHILIPPINES, AUTHORIZING ITS CONDUCT OF ISLAMIC BANKING BUSINESS, AND REPEALING FOR THIS PURPOSE PRESIDENTIAL DECREE NUMBERED TWO HUNDRED AND SIXTYFOUR AS AMENDED BY PRESIDENTIAL DECREE NUMBERED FIVE HUNDRED AND FORTY-TWO (CREATING THE PHILIPPINE AMANAH BANK) Section 3. Purpose and Basis. - The primary purpose of the Islamic Bank shall be to promote and accelerate the socio-economic development of the Autonomous Region by performing banking, financing and investment operations and to establish and participate in agricultural, commercial and industrial ventures based on the Islamic concept of banking. All business dealings and activities of the Islamic Bank shall be subject to the basic principles and rulings of Islamic Shari'a within the purview of the aforementioned declared policy. Any zakat or "ithe" paid by the Islamic Bank on behalf of its shareholders and
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depositors shall be its obligation to appropriate said zakat fund and to disburse it in legitimate channels to be ascertained first by the Shari'a Advisory Council. Section 7. Authorized Capital Stock. - The authorized capital stock of the Islamic Bank shall be One billion pesos (P1,000,000,000) divided into ten million par value shares of One hundred pesos each. All shares are nominative and indivisible. The subscription to and ownership of such shares, including the transfer thereof to third parties, shall be limited to persons and entities who subscribe to the concept of Islamic banking.

Corporation Code- Batas Pambansa Blng. 68 Sec. 9. Treasury shares. - Treasury shares are shares of stock which have been issued and fully paid for, but subsequently reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful means. Such shares may again be disposed of for a reasonable price

fixed by the board of directors. Sec. 25. Corporate officers, quorum. Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the bylaws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time. The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of
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officers which shall require the vote of a majority of all the members of the board. Directors or trustees cannot attend or vote by proxy at board meetings. TITLE XII CLOSE CORPORATIONS Sec. 96. Definition and applicability of Title. A close corporation, within the meaning of this Code, is one whose articles of incorporation provide that: (1) All the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than a specified number of persons, not exceeding twenty (20); (2) all the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class. Notwithstanding the foregoing, a corporation shall not be deemed a close corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the meaning of this Code.

Any corporation may be incorporated as a close corporation, except mining or oil companies, stock exchanges, banks, insurance companies, public utilities, educational institutions and corporations declared to be vested with public interest in accordance with the provisions of this Code. The provisions of this Title shall primarily govern close corporations: Provided, That the provisions of other Titles of this Code shall apply suppletorily except insofar as this Title otherwise provides. CIVIL CODE: Article 1953-1980 CHAPTER 2 SIMPLE LOAN OR MUTUUM Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality. (1753a) Art. 1954. A contract whereby one person transfers the ownership of non-fungible things
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to another with the obligation on the part of the latter to give things of the same kind, quantity, and quality shall be considered a barter. (n) Art. 1955. The obligation of a person who borrows money shall be governed by the provisions of Articles 1249 and 1250 of this Code. If what was loaned is a fungible thing other than money, the debtor owes another thing of the same kind, quantity and quality, even if it should change in value. In case it is impossible to deliver the same kind, its value at the time of the perfection of the loan shall be paid. (1754a) Art. 1956. No interest shall be due unless it has been expressly stipulated in writing. (1755a) Art. 1957. Contracts and stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be void. The borrower may recover in accordance with the laws on usury. (n) Art. 1958. In the determination of the interest,

if it is payable in kind, its value shall be appraised at the current price of the products or goods at the time and place of payment. (n) Art. 1959. Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest. (n) Art. 1960. If the borrower pays interest when there has been no stipulation therefor, the provisions of this Code concerning solutio indebiti, or natural obligations, shall be applied, as the case may be. (n) Art. 1961. Usurious contracts shall be governed by the Usury Law and other special laws, so far as they are not inconsistent with this Code. (n) Title XII. - DEPOSIT CHAPTER 1 DEPOSIT IN GENERAL AND ITS DIFFERENT KINDS
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Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract. (1758a) Art. 1963. An agreement to constitute a deposit is binding, but the deposit itself is not perfected until the delivery of the thing. (n) Art. 1964. A deposit may be constituted judicially or extrajudicially. (1759) Art. 1965. A deposit is a gratuitous contract, except when there is an agreement to the contrary, or unless the depositary is engaged in the business of storing goods. (1760a) Art. 1966. Only movable things may be the object of a deposit. (1761) Art. 1967. An extrajudicial deposit is either voluntary or necessary. (1762) CHAPTER 2

VOLUNTARY DEPOSIT SECTION 1. - General Provisions Art. 1968. A voluntary deposit is that wherein the delivery is made by the will of the depositor. A deposit may also be made by two or more persons each of whom believes himself entitled to the thing deposited with a third person, who shall deliver it in a proper case to the one to whom it belongs. (1763) Art. 1969. A contract of deposit may be entered into orally or in writing. (n) Art. 1970. If a person having capacity to contract accepts a deposit made by one who is incapacitated, the former shall be subject to all the obligations of a depositary, and may be compelled to return the thing by the guardian, or administrator, of the person who made the deposit, or by the latter himself if he should acquire capacity. (1764) Art. 1971. If the deposit has been made by a capacitated person with another who is not, the depositor shall only have an action to recover the thing deposited while it is still in the possession of the depositary, or to
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compel the latter to pay him the amount by which he may have enriched or benefited himself with the thing or its price. However, if a third person who acquired the thing acted in bad faith, the depositor may bring an action against him for its recovery. (1765a) SECTION 2. - Obligations of the Depositary Art. 1972. The depositary is obliged to keep the thing safely and to return it, when required, to the depositor, or to his heirs and successors, or to the person who may have been designated in the contract. His responsibility, with regard to the safekeeping and the loss of the thing, shall be governed by the provisions of Title I of this Book. If the deposit is gratuitous, this fact shall be taken into account in determining the degree of care that the depositary must observe. (1766a) Art. 1973. Unless there is a stipulation to the contrary, the depositary cannot deposit the thing with a third person. If deposit with a third person is allowed, the depositary is liable for the loss if he deposited the thing

with a person who is manifestly careless or unfit. The depositary is responsible for the negligence of his employees. (n) Art. 1974. The depositary may change the way of the deposit if under the circumstances he may reasonably presume that the depositor would consent to the change if he knew of the facts of the situation. However, before the depositary may make such change, he shall notify the depositor thereof and wait for his decision, unless delay would cause danger. (n) Art. 1975. The depositary holding certificates, bonds, securities or instruments which earn interest shall be bound to collect the latter when it becomes due, and to take such steps as may be necessary in order that the securities may preserve their value and the rights corresponding to them according to law. The above provision shall not apply to contracts for the rent of safety deposit boxes. (n) Art. 1976. Unless there is a stipulation to the contrary, the depositary may commingle grain
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or other articles of the same kind and quality, in which case the various depositors shall own or have a proportionate interest in the mass. (n) Art. 1977. The depositary cannot make use of the thing deposited without the express permission of the depositor. Otherwise, he shall be liable for damages. However, when the preservation of the thing deposited requires its use, it must be used but only for that purpose. (1767a) Art. 1978. When the depositary has permission to use the thing deposited, the contract loses the concept of a deposit and becomes a loan or commodatum, except where safekeeping is still the principal purpose of the contract. The permission shall not be presumed, and its existence must be proved. (1768a) Art. 1979. The depositary is liable for the loss of the thing through a fortuitous event: (1) If it is so stipulated;

(2) If he uses the thing without the depositor's permission; (3) If he delays its return; (4) If he allows others to use it, even though he himself may have been authorized to use the same. (n) Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan. (n)

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