Commercial Law

Special Commercial Laws

XI. Special Laws

A. The Chattel Mortgage Law (Act 1508 in rel. to Arts. 1484, 1485, 2140 and 2141 of the Civil Code) 1. Essential requisites
Q: What are the essential requisites for a valid chattel mortgage? 1. Accessory contract constituted to secure fulfillment of the principal obligation 2. Mortgagor is the absolute owner of the property 3. Mortgagor has free disposal of the property, in the absence thereof, that he be legally authorized for such purpose 4. That it involves and describes a personal property. T/F: Only personal properties may be the subject of a chattel mortgage. A: False! The contracting parties may treat a real property as chattel; however, this agreement is binding only as to them; as far as 3rd persons are concerned, a real property is a real property. Hehe.

A: There is no specific time within which a chattel mortgage should be recorded but the law is substantially complied with if registration is made: Before the mortgagor has complied with his principal obligation; and No right of innocent third parties is prejudiced. Q: What is the dual registration rule? GR: The property must be registered twice; first, in the place where mortgagor resides and second, in the place where property is situated. XPN: First, if the mortgagor resides in the same place where the property is located; second, if the amount of the loan is above P 500,000.00, registration which should be made only in the city or municipality where the property is situated. Registration must be made in the Chattel Mortgage Registry! Q: If there is actual knowledge but no registration, is the 3rd party who has actual knowledge bound by the chattel mortgage? A: Yes! The registration requirement is complied with by reason of actual knowledge.

2. Formal requisites
Q: What are the formal requisites for a valid chattel mortgage? 1. 2. 3. Affidavit of good faith Registration with the Chattel Mortgage Registry If necessary, additional registration with the proper government agency

4. After-acquired property
Q: Can the CM cover after-acquired properties? GR: No, because Section 7 of Act 1508 provides: A chattel mortgage shall be deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgage. XPN: rolling stock where the after-acquired property is in renewal of, or in substitution for, goods on hand when the mortgage was executed, or is purchased with the proceeds of the sale of such goods; STIPULATED DAPAT!

Q: What is an affidavit of good faith? A: A certificate included in the chattel mortgage contract executed by both mortgagor and mortgagee stating that: The obligation is valid, just and subsisting; and It is not one entered into for purposes of fraud. Q: What is the effect of absence of affidavit of good faith? A: It does not affect the validity of the chattel mortgage but the same will be unenforceable against third persons. Q: What is the status of an unrecorded CM? A: The mortgage is valid and binding between the parties. Registration is necessary only for the

5. After-incurred obligation
Q: Can the CM cover after-incurred obligations? A: No, the affidavit of good faith in a CM makes it obvious that the debt referred to in the law is current, not an obligation that is yet merely contemplated. Q: What then is the consequence of a CM covering afterincurred obligations? A: A promise expressed in a CM to include debts that are yet to be contracted can be a binding commitment that can be compelled upon. The security itself, however, does not come into existence or arise until after a CM agreement covering newly contracted debt is executed
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purpose of binding third persons.

3. Registration, when and where

Q: What is the period within which to make registration and where?

Commercial Law
Special Commercial Laws either by concluding a fresh CM or by amending the old contract conformably with the form prescribed by the CM law. The remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the CM sought to be foreclosed. In accommodation mortgages, the accommodation mortgagor is liable only to the extent of the value of the mortgaged property Due to death of the mortgagor [c. Article 1484] Q: When does the Recto Law apply (Articles 1484 & 1485 of the Civil Code)? 1. Sale of personal property, the price of which is payable in two or more instalments [does not apply in straight sales DP now, balance later] Contracts purporting to be leases of personal property with option to buy.

6. Right of junior mortgagee

Q: What is the right of a subsequent attaching creditor? A: A subsequent attaching creditor acquired the properties in question subject to the creditors mortgage lien as it existed thereon at the time of the attachment. What may be attached in this case is only the equity or right of redemption of the mortgagor.

2.

7. Foreclosure procedure
Q: When and how is foreclosure of CM conducted? A: After 30 days from the time the condition is broken: At a public auction by a public officer Provided at least 10 days notice of the time, place, and purpose of such sale has been posted at two or more public places in such municipality At a public place in the municipality where the mortgagor resides, or where the property is situated

Q: Under the Recto Law, what are the remedies of the unpaid seller? Exact fulfillment of the obligation, should the vendee fail to pay (action for specific performance) Cancel the sale, should the vendees failure to pay cover two or more installments (rescission); or Foreclose the chattel mortgage on the thing sold, should the vendees failure to pay cover 2 or more installments. Q: Can the unpaid seller avail of all remedies? A: No, the remedies are alternative. Note: However, recovery of property through a replevin case preparatory to foreclosure will not bar the other remedies if there was no actual foreclosure. If sellermortgagee opts to file an action for specific performance, he shall be deemed to have waived his right as a mortgagee but may still levy on the mortgaged property (on execution). Q: Is the mortgagees letter informing the mortgagor of his intent to foreclose is already considered a foreclosure of the chattel? A: No. A mere offer by the mortgagor to surrender the chattel, not accepted by the mortgagee, does not preclude the mortgagee from bringing suit to recover the balance of the purchase price.

8. Redemption
Q: Is there a right of redemption in CM? A: There is no right of redemption in Chattel Mortgage. There is only an equity of redemption. Q: When is equity of redemption may be exercised? A: Equity of redemption may be exercised by the mortgagor after his default in the performance of his obligation but before the sale of the mortgaged property or confirmation of sale. Q: Who may redeem? A: The following may redeem if the condition of the mortgage is broken: Mortgagor A person holding subsequent mortgage A subsequent attaching creditor

B. Real Estate Mortgage Law (Act 3135, as amended by R.A. 4118) 1. Coverage
Q: What is real estate mortgage (REM)? A: It is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property which obligation shall be satisfied with the proceeds of the sale of said property or rights in case the said obligation is not complied with at the time stipulated. Q: What is the nature of REM?
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9. Claim for deficiency

[a. General rule] GR: The mortgagee is entitled to recover the deficiency. [b. Exceptions] Recto Law

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Special Commercial Laws A: It creates real right over the property, such that in subsequent transfers by the mortgagor, the transferee must respect the mortgage. Q: Can a REM be constituted to secure future advancements? A: Yes! Dragnet clause! Action to foreclose a mortgage is usually limited to the amount mentioned in the mortgage, but where the intent of the contracting parties is manifest that the mortgaged property shall also answer for future loans or advances then the same is not improper as it is valid and binding between the parties. While a dragnet clause is valid in REM, these future debts must be sufficiently described in the mortgage contract. An obligation is not secured by a mortgage unless it comes fairly within the terms of the mortgage contract.

solely on the certificate of title! As their business is impressed with public interest, they are expected to exercise more care and prudence in their dealings than private individuals. 3. Need for special power of attorney
Q: Why is special of power of attorney needed? A: Because an extrajudicial foreclosure may only be effected if the mortgage contract covering a real estate, clause is incorporated therein giving the mortgagee the power, upon default of the debtor to foreclose the mortgage by an extrajudicial sale of the mortgaged property.

4. Authority to foreclose extrajudicially

Q: May the authority to sell may be done in a separate document but annexed to the contract of mortgage? A: Yes Q: Is the authority extinguished by the death of the mortgagor or mortgagee? A: No, because it is an essential and inseparable part of a bilateral agreement.

2. Remedies available to mortgagee upon default of the mortgagor

Q: What are the alternative remedies of the mortgagee? 1. Mortgagor is living a. Foreclosure b. Judicial c. Extrajudicial d. Ordinary action for collection of money effect is waiver of REM 2. Mortgagor is dead a. Waive the mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim b. Judicial foreclosure; and c. Rely on the mortgage. d. Extrajudicial foreclosure before it is barred by prescription without right to file a claim for any deficiency. Q: What is the doctrine of mortgagee in good faith? A: Despite the fact that the mortgagor is not the owner of the mortgaged property, his title being fraudulent, the mortgage contract and any foreclosure sale arising therefrom are given effect by reason of public policy. This doctrine is based on the rule that all persons dealing with the property covered by a TCT, as buyers or mortgagees, are not required to go beyond what appears on the face of the title. The public interest in upholding the indefeasibility of a certificate of title, as evidence of lawful ownership of the land or of any encumbrance thereon, protects a buyer or mortgagee who, in good faith, relied upon what appears on the fact of the certificate of title. Caveat: Mortgagee is not in good faith where the mortgaged title contains an adverse claim. Note: In relation to the doctrine of mortgagee in

5. Procedure
[a. Where to file] [b. Where to sell] [c. Posting requirement] [d. Publication requirement] Q: What are the stages in extra-judicial foreclosure? 1. Execution of contract of loan and REM agreement with the corresponding SPA. 2. Default of the mortgagor-debtor either by: a. b. Non-payment; or Violation of the terms of the loan or REM agreement.

3. Filing of petition for sale with clerk of court who acts as ex-officio sheriff (A.M. No. 99-10-05-00). Afterwards, the clerk of court will raffle it among the sheriffs, who shall conduct the foreclosure sale once given the authority to do so. Note: Petition is filed where the property is located. In case the mortgaged properties are located in different provinces, the venue of the extrajudicial foreclosure proceedings is the place where each of the mortgaged property is located. A mortgage action prescribes in 10 years from the time the right of action accrues, that is, from the time the mortgagor defaults in the payment of his

good faith, it must be emphasized that this doctrine does not apply to banks Banks should not rely
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Commercial Law
Special Commercial Laws obligation to the mortgagee and not from the date of the execution of the mortgage contract. 4. Compliance with certain jurisdictional requirements: a. Publication in a newspaper of general circulation once a week for 3 consecutive weeks; and Note: Publication is jurisdictional! XPN: REM covering loans not exceeding P100k, exclusive of interests, granted by rural banks or thrift banks. Ang kailangan lang is posting of notices of foreclosure, albeit for a longer period of 60 days. ;) b. Posting of the notice of sale for not less than 20 days in at least 3 public/conspicuous places in the province or municipality where property is located. Note: A certificate of posting is not indispensable for the validity of an extra judicial foreclosure sale of real property. What the law requires is the posting of the notice of sale and not the certificate of posting. 5. Foreclosure the remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation to secure which the mortgage was given. 6. Registration of sale with the RD This pertains to the annotation of the sale to the TCT on file with the RD. 7. Redemption The mortgagor reacquires or buys back the property, which may have passed under the mortgage. 8. Consolidation of title By filing affidavit with RD. The Affidavit of Consolidation of Title must indicate the relevant dates to show mortgagors failure to redeem within the allowable time. This enables the mortgagee to acquire full ownership over the property. His inchoate right ripens to full ownership. 9. Cancellation of the title of the mortgagor and Issuance of a new title in favor of mortgagee The basis of which is the order of court confirming the sale. 10. Petition for a writ of possession There is no need to file an ejectment suit. Here, the mortgagee employs force to oust the mortgagor from the property. This writ may be even issued during redemption period provided the mortgagee issued a bond, but the grant of which is discretionary on the part of the court. But if the petition for the writ is filed after the expiration of the redemption period, the issuance of which is ministerial on the part of the court. This writ can be issued without the issuance of a bond; in fact it
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can even be issued ex parte. The writ cannot be suspended even by the filing of the mortgagor of an action to annul the foreclosure sale. Q: What is meant by once a week for three consecutive weeks? A: A period of 7 days, inclusive of the first day of publication. The publication must be made 7 days apart. Q: Is there a need for personal notice? A: No, because foreclosure of CM is an action in rem whereby mere publication is enough to confer jurisdiction over the subject matter. Personal notice to the parties is not necessary. Note: If personal notice to the mortgage is stipulated, then such personal notice must be done! Q: What happens when the foreclosure sale is postponed? A: The notice of sale must be republished once a week for three consecutive weeks, otherwise, foreclosure is invalid. Q: Is the rule on republication absolute? GR: Yes. XPNS: The sale was not finished and is continued the following day until completed; or When there is waiver.

6. Possession by purchaser of foreclosed property

Q: Who retains possession of the foreclosed property? A: Upon foreclosure, the mortgagor shall remain in possession of the property until the period to redeem expires and no redemption was made. If the winning bidder wants to take possession during the redemption period, he may execute a bond in the amount equivalent to the use of the property for 12 months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of the Act. Upon approval, a writ of possession will be issued in his favor.

7. Remedy of debtor if foreclosure is not proper

Q: What is the remedy of debtor if foreclosure is not proper? A: If the winning bidder is able to secure possession, the mortgagor may petition that the sale is set aside and the writ of possession be cancelled on the ground that he wasn't in default or that the sale wasn't made in accordance with Act 3135. This must be filed within 30 days from issuance of the writ of possession.

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Special Commercial Laws

8. Redemption
[a. Who may redeem] Q: Who may redeem? A: The debtor, his successors-in-interest, or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of 1 year from and after the date of the sale and such will be governed by the rules of Court. [b. Amount of redemption price] Q: What is the amount of redemption price? A: RP + % + assessment taxes. Q: What is the rule as to the redemption price in case the mortgagee is a banking institution? A: Where the mortgagee is a banking institution, the redemption price is the amount fixed by the court in the order of execution or the amount due under the mortgaged deed. Q: What is the redemption price in case accommodation mortgagors? of

Mortgagee is a bank, quasibank or trust entity; and Foreclosure is done extra judicially.

Q: Can the 1 year redemption period be extended? A: Why not? As long as the parties agree with the extension. [d. Effect of pendency of action for annulment of sale] Q: What is the effect of filing an action to annul the foreclosure sale during the one-year redemption period? A: It will not toll the running of the one-year redemption period. Note: A judicial action instituted for the sole purpose of determining the amount of the redemption price, if filed before the expiration of the original period to redeem, has the effect of a valid exercise of the right to redeem and will suspend the running of the period of redemption even if unaccompanied by a simultaneous tender of the redemption price. However, before this rule can be made to apply, it is essential that the judicial action was instituted by the mortgagor in good faith and not merely designed to delay the redemptive period indefinitely.

9. Writ of possession
[a. Ministerial duty of the court] Q: When is the issuance of the Writ of Possession a ministerial duty of the court? A: The writ may be issued during redemption period provided the mortgagee gives a bond, the grant of which is discretionary on the part of the court. But if the petition for the writ is filed after the expiration of the redemption period, the issuance is ministerial on the part of the court.
Possible question: Suppose the redemption period has expired. The winning bidder files a petition for the issuance of a writ of possession. He did not file a bond. The writ was granted and issued. Mortgagor contends that the issuance of the writ was invalid since a bond was not filed. Valid contention? No! No need to file a bond, since tapos na yung redemption period; absolute owner na yung bidder; consequently, the issuance of the writ of possession is now ministerial.

A: Accommodation mortgagors are not liable for the payment of the loan of the debtor. The liability of the accommodation mortgagors extends only up to the loan value of their mortgaged property and not to the entire loan itself. Hence, it is only just that they be allowed to redeem their mortgaged property by paying only the winning bid price + % at the public auction sale. [c. Period for redemption] Q: When must the buyer exercise the right of redemption?

One year from the date of registration of certificate of sale.

A: Note: The exercise of the right of redemption is an implied admission of the regularity of the foreclosure sale and estops the mortgagor from later impugning its validity on that ground. Redemption is inconsistent with the claim of the invalidity of the sale. Q: When does the one year period for redemption not apply? A: It does not apply to real estate mortgages constituted by juridical persons in favor of a bank, quasi-bank or trust entity. Right to redeem can only be exercised until but not after the registration of the certificate of sale or 3 months from foreclosure, whichever is earlier, under the following conditions: Mortgagor must be a juridical person that is either a partnership or a corporation

[b. Enforcement against third parties] Q: What are the remedies availing in favor of third parties adversely affected by the order for the issuance of the writ of possession in favor of the winning bidder? Terceria to determine whether the sheriffs has rightly or wrongfully taken hold of the property not belonging to the judgment debtor or obligor; and An independent separate action to vindicate their claim of ownership and/or possession over the foreclosed property. Note: A third party in possession of the property who is claiming a right adverse to that of the
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Commercial Law
Special Commercial Laws debtor/mortgagor may not be dispossessed on the strength of a mere ex parte possessory writ, since to do so would be tantamount to his summary ejectment. [c. Pendency of action for annulment of sale] Q: What is the effect of a pending action for annulment of sale? A: the mortgagee is still entitled to writ of possession, without prejudice to the eventual outcome of the said case. annual rate on the outstanding unpaid balance of the obligation.

2. Obligation of creditors to person to whom credit is extended

Q: Who is a creditor under the TLA? A: Creditor means any person engaged in the business of extending credit who requires as an incident to the extension of credit the payment of a finance charge. Q: What does a finance charge include under the TLA? A: Finance charge includes interest fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may by regulation prescribed.

10. Annulment of sale

Q: Is the filing of an action to nullify the extrajudicial sale a prejudicial question to the petition filed by the mortgagee for the issuance of the writ of possession? A: No, a complaint for annulment of extrajudicial sale is a civil action and a petition for the issuance of writ of possession is but an incident to the land registration proceeding hence no prejudicial question can arise from the two actions. Q: Is the filing of the annulment of sale toll the 1 year redemption period? A: No, Settled is the rule that the period within which to redeem the property sold at a sheriffs sale is not suspended by the institution to annul the foreclosure sale.

3. Covered and excluded transactions

Q: What are the credit transactions covered by TILA? 1. Loans, mortgages, deeds of trust, advances and discounts; 2. Conditional sales contracts, any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; 3. Any rental-purchase contract; 4. Any contract for the hire, bailment or leasing of property; 5. Any option, demand, lien, pledge or other claim against, or for delivery of, property or money; 6. Any purchase, or other acquisition of, or any credit upon the security of, any obligation or claim arising out of any of the foregoing; and 7. Any transaction or series of transactions having a similar purpose or effect. Q: What transactions are not covered by TILA? Those which do not involve the payment of any finance charges by the debtor; and Where the debtor is the one specifying a definite and fixed set of credit terms such as bank deposits, insurance contracts, sale of bonds, etc.

C. Truth in Lending Act (R.A. 3765) 1. Purpose

Q: What is the purpose of the TLA? A: The purpose of the TLA is the full disclosure to the borrower of the true cost of credit as well as other finance charges. In this connection, any creditor is required to furnish to each person to whom credit is extended prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with the rules and regulations prescribed by the MB, the following information. The cash price or delivered price of the property or service to be acquired; The amounts, if any, to be credited as down payment and/or trade-in; The difference between ^; The charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; The total amount to be financed; The finance charge expressed in terms of pesos and centavos; and The % that the finance charge bears to the total amount to be financed expressed as simple

4. Consequences of non-compliance with obligation

On transaction On creditor Failure to disclose finance charge Charges not itemized cannot be Liable in the amount of P100 or in collected. If already paid, can be an amount equal to twice the recovered finance charged required by such creditor, whichever is the greater, however, such liability shall not exceed P2,000 on any credit transaction. Willful violation of any provisions of the TLA Except as provided in subsec. (a), Shall be liable to a fine of not less nothing shall affect the validity or than P1,000 or more than P5,000 enforceability of any contract or or imprisonment for not less than
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Q: What is the effect of non-compliance with TILA?

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Special Commercial Laws
transactions. 6 months, nor more than one year or both.

instruments or property supervised or regulated by SEC.

D. Anti-money Laundering Law (R.A. 9160, as amended by R.A. 9194) 1. Policy of the law
Q: What is the policy of the AMLA? A: The primary purpose of the AMLA is to protect the integrity and confidentiality of bank accounts. Q: What is money laundering? A: Money laundering is a crime whereby the proceeds of an unlawful activity are transacted, thereby making them appear to have originated from legitimate sources. Q: Under the AMLA, measures for customer identification are made. Are synonymous account/s under fictitious names or similar accounts allowed? A: No. Covered institutions shall maintain accounts only in the true and full name of the account owner. The provisions of existing laws to the contrary notwithstanding, anonymous accounts and other similar accounts shall be prohibited. Q: Are numbered accounts allowed? A: Yes. Peso and Foreign Currency non-checking numbered accounts shall be allowed; Provided, the true identity of the customer is obtained and recorded that is open to examination by the BSP, SEC, and IC.

3. Obligations of covered institutions

Q: What is the obligation of the covered institutions? A: They are mandated by the AMLA to submit covered and suspicious transaction reports to the AMLC within 5 days from occurrence thereof, unless the supervising authority concerned prescribes a longer period not exceeding 10 working days. Note: All covered institutions shall maintain and safely store for 5 years, records of its transactions. However, if any money laundering case based on any record has been filed, said record must be retained beyond the 5year period until the final resolution or termination of the case. Q: Is there a violation of the SBD and similar laws when reporting covered or suspicious transactions? A: None. When reporting covered or suspicious transactions to the AMLC, covered institutions and their offices and Ees, shall not be deemed to have violated the SBD and similar laws. In fact, no administrative, criminal or civil proceedings shall lie against any person for having made a covered or suspicious transaction report in the regular performance of his duties and in good faith, whether or not such reporting results in any criminal prosecution under this Act or any other Philippine law. This is known as the Safe Harbor Provision!

2. Covered institutions Q: What are the covered institutions under the AMLA?
1. 2. 3. 4. 5. Banks Non-banks Quasi-banks Trust entities All other institutions, their subsidiaries and affiliates supervised or regulated by BSP 6. Insurance companies and all other institutions supervised and regulated by the Insurance Commission 7. Securities dealers, brokers, salesmen, investment houses and other similar entities managing securities or rendering services as investment agent, advisor, or consultant 8. Mutual funds, closed-end investment companies, common trust funds, pre-need companies and other similar entities 9. Foreign exchange, corporations, money changers, money payments, remittance and transfer companies and other similar entities; and 10. Other entities administering or otherwise dealing in currency, commodities or financial derivatives based thereon, valuable objects, cash substitutes, and other similar monetary
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4. Covered transactions
Q: What are Covered Transactions? A: These are single transactions in cash or other equivalent monetary instrument involving a total amount in excess of 500,000.00 within 1 banking day. Note: These transactions are required to be reported to the Anti-Money Laundering Council.

5. Suspicious transactions
Q: What are Suspicious Transactions? A: Regardless of amount, if any of the following is present: No underlying economic, trade or legal justification Client not properly identified; numbered accounts are allowed provided client is identified Transaction is not commensurate with financial capability of the client Transaction is so structured that it cannot be reported to the AMLC Transaction which deviates from usual profile of the client Relates to unlawful activity as defined by law

Commercial Law
Special Commercial Laws Analogous transactions operations, are made to appear as having originated from legitimate sources. The money laundering crime is separate from the unlawful activity of being a jueteng operator, and requires no previous conviction for the unlawful activity. Q: In disclosing Alvin's bank accounts to the AMLC, did the bank violate any law? A: No, the bank did not violate any law. The bank being specified as a "covered institution" under the AMLA, is obliged to report to the AMLC covered and suspicious transactions, without thereby violating any law. This is one of the exceptions to the Secrecy of Bank Deposit Act.

6. When is money laundering committed

Q: How is money laundering committed? A: It is committed by the following persons: Any person knowing that the monetary instrument or property represents, involves, or relates to, the proceeds of any unlawful activity, transacts or attempts to transact said monetary instrument or property. Any person knowing that any monetary instrument or property involves the proceeds of any unlawful activity performs or fails to perform any act as a result of which he facilitates the offense referred to in No. 1 above. Any person knowing that any monetary instrument or property is required under this Act to be disclosed and filed with the Anti-Money Laundering Council (AMLC), fails to do so.

8. Anti-money laundering council

Q: What is the composition of the AMLC? Chairman: BSP Governor Members: o Commissioner of the IC o Chairman of the SEC The AMLC shall act unanimously in discharging its functions.

7. Unlawful activities or predicate crimes

Q: What are considered as unlawful activities or predicate crimes under AMLA? A: These refer to any act or omission or series or combination thereof involving or having direct relation to the following: Kidnapping for ransom Drug trafficking and related offenses Graft and corrupt practices Plunder Robbery and Extortion Jueteng and Masiao Piracy Qualified theft Swindling Smuggling Violations under the Electronic Commerce Act of 2000 Hijacking, destructive arson, and murder, including those perpetrated by terrorists against non-combatant persons and similar targets Fraudulent practices and other violations under the SRC of 2000; Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.

9. Functions
Q: What are the functions of AMLC? 1. To require and receive reports of suspicious transactions from covered institutions Note: Covered institutions include, (banks and all other institutions and their subsidiaries and affiliates supervised or regulated by BSP; insurance companies and all other institutions supervised or regulated by the IC; and securities dealers and other entities supervised or regulated by the SEC) 2. To issue orders addressed to the Supervising Authority or the covered institution 3. To institute civil forfeiture proceedings and all other remedial proceedings through the OSG 4. To cause the filing of complaints with the DOJ or the Ombudsman for the prosecution of money laundering offenses 5. To investigate suspicious transactions and covered transactions deemed suspicious after an investigation by AMLC 6. To apply before the CA, ex parte, for the freezing of any monetary instrument/property alleged to be proceeds of any unlawful activity as defined in the AMLA 7. To implement such measures as may be necessary and justified to counteract money laundering

Q: Alvin is jobless but is reputed to be a jueteng operator. He has never been charged or convicted of any crime. He maintains several bank accounts amounting to P100 Million. AMLC charged Alvin with violation of the Anti-Money Laundering Law. Can Alvin move to dismiss the case on the ground that he has no criminal record? A: No. The contention of Alvin is not tenable because under AMLA, "money laundering crime" committed when the proceeds of an "unlawful activity," like jueteng
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Special Commercial Laws 8. To receive and take action in respect of any request for assistance from foreign states in their own anti-money laundering operations 9. To develop educational programs pernicious effects of money laundering. on the A: The freeze order shall be effective for 20 days unless extended by the CA upon application by the AMLC. Before the 20-day period of the freeze order issued by the CA expires, the AMLC may apply in the same court for an extension of the said period. Upon the timely filing of such application and pending the decision of the CA to extend the period, said period shall be deemed suspended and the freeze order shall remain effective. However, the covered institution shall not life the effects of the freeze order without securing official confirmation from the AMLC.

10. To enlist the assistance of any branch, department, bureau, office, agency or instrumentality of the government, including GOCCs in undertaking any and all anti-money laundering operations 11. To impose administrative sanctions for the violation of laws, rules, regulations and orders and resolutions issued pursuant thereto. 12. To examine or inquire into bank deposits/investments upon order of any competent court in cases of violation of the AMLA, when it has been established that there is probable cause that the deposits/investments are related to an unlawful activity. Note: No court order, however, is necessary in cases involving kidnapping for ransom; narcotics offenses; and hijacking, destructive arson and murder, including those perpetrated by terrorists against noncombatant persons and similar targets.

11. Authority to inquire into bank deposits

Q: When may the AMLC inquire into bank deposits? GR: Only upon order of any competent court in cases of violation of R.A. 9160, as amended. XPN: No need of court order in cases of Kidnapping, Hijacking, Drugs, Arson, Murder.

E. Foreign Investments Act (R.A. 7042) 1. Policy of the law

Q: What is the state policy of the law? 1. It is the policy of the State to attract, promote and welcome productive investments in activities which significantly contribute to national industrialization and socio-economic development to the extent that foreign investment is allowed in such activity by the Constitution and relevant laws from a. Foreign individuals b. Partnerships c. Corporations d. Governments, including their political subdivisions 2. Foreign investments shall be encouraged in the enterprises that significantly expand livelihood and employment opportunities for Filipinos by a. Enhancing economic value of farm products; b. Promoting the welfare of Filipino consumers; c. Expanding the scope, quality and volume of exports and their access to foreign markets; d. And/or transferring relevant technologies in agriculture, industry and support services. 3. Foreign investments shall be welcome as a supplement to Filipino capital and technology in those enterprises serving mainly the domestic market. 4. GR: There are no restrictions on extent of foreign ownership of export enterprises. In domestic

10. Freezing of monetary instrument or property

Q: Who has jurisdiction for violations of AMLA? RTC all cases on money laundering Sandiganbayan Those committed by public officers and private persons in conspiracy with them.

Q: May the AMLC apply for a freeze order of any monetary instrument or property? A: Yes. After investigation conducted by the AMLC and upon determination that probable cause exists that a monetary instrument or property and related web of accounts, xxx is any way related to any unlawful activity, the AMLC may file an ex-parte application before the CA for the issuance of a freeze order. Q: Which court has the jurisdiction to issue a freeze order? A: It is solely the CA which has the authority to issue a freeze order upon application ex parte by the AMLC and after determination that probable cause exists. It also has the exclusive jurisdiction to extend existing freeze orders previously issued by the AMLC vis--vis accounts and deposits related to money-laundering activities. Note: However, no assets shall be frozen to the prejudice of a candidate for an electoral office during an election period. Q: What is the effective period of the freeze order?
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Special Commercial Laws market enterprises, foreigners can invest as much as 100% equity XPN: In areas included in the negative list. 5. Foreign-owned firms catering mainly to the domestic market shall be encouraged to undertake measures that will gradually increase Filipino participation in their businesses by a. Taking in Filipino partners, b. Electing Filipinos to the board of directors, c. Implementing transfer of technology to Filipinos, d. Generating more employment for the economy and e. Enhancing skills of Filipino workers. 5. 6. 7. 8. Maintaining a stock of goods in the Philippines solely for the purpose of having the same processed by another entity in the Philippines Consignment by the foreign corporation of equipment with a local company to be used in the processing of products for export Collecting information in the Philippines Performing services auxiliary to an existing isolated contract of sale which are not on a continuing basis. [c. Export enterprise] Q: What is Export Enterprise? A: It is an enterprise wherein a manufacturer, processor or service [including tourism] enterprise exports sixty percent (60%) or more of its output, or wherein a trader purchases products domestically and exports sixty per cent (60%) or more of such purchases. [d. Domestic market enterprise] Q: What is domestic market enterprise? A: It is an enterprise which produces goods for sale, or renders services to the domestic market entirely or if exporting a portion of its output fails to consistency export at least 60% thereof. Non-Philippine nationals may own up to one hundred percent [100%] of domestic market enterprises unless foreign ownership therein is prohibited or limited by the Constitution and existing law or the Foreign Investment Negative.

2. Definition of terms
[a. Foreign investment] Q: What is foreign investment? A: It is an equity investment made by non-Philippine national in the form of foreign exchange and/or other assets actually transferred to the Philippines and duly registered with the Central Bank which shall assess and appraise the value of such assets other than foreign exchange. [b. Doing business in the Philippines] Q: What are considered as doing or transacting business in the Philippines for foreign corporations? 1. 2. 3. 4. Soliciting orders, service contracts, and opening offices Appointing representatives, distributors domiciled in the Philippines or who stay for a period or periods totaling 180 days or more Participating in the management, supervision or control of any domestic business, firm, entity, or corporation in the Philippines Any act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to some extent the performance of acts or works or the exercise of some functions normally incident to and in progressive prosecution of, the purpose and object of its organization.

3. Registration of investments of non-Philippine nationals

Q: Who are considered Philippine nationals? A citizen of the Philippines A domestic partnership or association wholly owned by citizens of the Philippines; Corporations organized under Philippine laws of which 60% of the capital stock outstanding and entitled to vote is owned and held by Filipino citizens; Corporations organized abroad and registered as doing business in the Philippines under the Corporation Code of which 100% of the capital stock entitled to vote belong to Filipinos. Note: However, it provides that where a corporation and its non-Filipino stockholders own stocks in a SECregistered enterprise, at least 60% of the capital stock outstanding and entitled to vote of both corporations and at least 60% of the members of the board of directors of both corporations must be Filipino citizens (DOUBLE 60% RULE). Q: Who are considered non-Philippine nationals? A: Those who do not belong to the definition of a Philippine national.
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Q: What are considered as NOT doing or transacting business in the Philippines for foreign corporations? 1. 2. 3. 4. Mere investment as shareholder and exercise of rights as investor. Having a nominee director or officer to represent its interest in the corporation Appointing a representative or distributor which transacts business in its own name and for its own account Publication of a general advertisement through any print or broadcast media

Commercial Law
Special Commercial Laws Q: What is needed for a non-Philippine national but not disqualified by law may do business or invest in a domestic enterprise up to 100% of its capital without need of prior approval? A: Register with the Securities and Exchange Commission (SEC) or with the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry in the case of single proprietorship. Q: May SEC or BTRCP impose any limitations on the extent of foreign ownership in an enterprise additional to those provided in R.A. 7042? GR: The SEC or BTRCP, as the case may be, shall not impose any limitations on the extent of foreign ownership in an enterprise additional to those provided in R.A. 7042. XPNS: That any enterprise seeking to avail of incentives under the Omnibus Investment Code of 1987 must apply for registration with the Board of Investments (BOI), which shall process such application for registration in accordance with the criteria for evaluation prescribed in said Code; That a non-Philippine national intending to engage in the same line of business as an existing joint venture, in which he or his majority shareholder is a substantial partner, must disclose the fact and the names and addresses of the partners in the existing joint venture in his application for registration with the SEC. A person who violates any provision of R.A. 7042 or of the terms and conditions of registration or of the rules and regulations issued pursuant thereto, or aids or abets in any manner any violation shall be subject to a fine not exceeding P100,000. If the offense is committed by a juridical entity, it shall be subject to a fine in an amount not exceeding 1/2 of 1% of total paid-in capital but not more than P5,000,000.00 The president and/or officials responsible therefor shall also be subject to a fine not exceeding P200,000.00 In addition to the foregoing, any person, firm or juridical entity involved shall be subject to forfeiture of all benefits granted under R.A. 7042.

5. Foreign investments in domestic market enterprises

Q: What is the rule regarding foreign investment in domestic market enterprises? A: Non-Philippine nationals may own up to 100% of domestic market enterprises unless foreign ownership therein is prohibited or limited by the Constitution and existing law or the Foreign Investment Negative List.

4. Foreign investments in export enterprises

Q: What are rules regarding foreign registration in export enterprises? 1. Foreign investment in export enterprises whose products and services do not fall within Lists A and B of the Foreign Investment Negative List is allowed up to 100% ownership 2. Export enterprises which are non-Philippine nationals shall register with BOI and submit the reports that may be required to ensure continuing compliance of the export enterprise with its export requirement. 3. BOI shall advise SEC or BTRCP, as the case may be, of any export enterprise that fails to meet the export ratio requirement. 4. The SEC or BTRCP shall thereupon order the noncomplying export enterprise to reduce its sales to the domestic market to not more than 40% of its total production; failure to comply with such SEC or BTRCP order, without justifiable reason, shall subject the enterprise to cancellation of SEC or BTRCP registration, and/or the penalties provided in this law. Q: What are the penalties provided under R.A. 7042?

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6. Foreign investment negative list

0% foreign equity PM-FM-CRUPS a. b. c. d. e. f. g. h. i. j. Practice of all professions Mass media Manufacture of firecrackers and other pyrotechnic devices Manufacture, repair, stockpiling and/or distribution of nuclear weapons Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and antipersonnel mines Cooperatives Cockpits Retail trade enterprises with paid-up capital of less than US $2.5M Utilization of marine resources Private security agencies Small-scale mining

Up to 20% foreign equity Up to 25% foreign equity

Private Radio Communications Network

a. b.

Private recruitment Contracts for the construction of and repair of locally-funded public works except: (infrastructure development projects under RA 7718) (projects which are foreign funded and required to undergo international competitive bidding ) Contracts for the construction of defense-related structures

Up to 30% foreign equity

Advertising Up to 40% foreign equity O-PEMU PACOME

a. b. c. d. e. f. g. h. i. Ownership of private lands Ownership/establishment and administration of educational institutions Operation and management of public utilities Ownership of condominium units Project Proponent and facility operator of a BOT project requiring a public utilities franchise Adjustment companies Contracts for the supply of materials, goods and commodities to GOCCs, agencies or municipal corporations Operation of deep sea commercial fishing vessel Manufacture, repair, storage and/or distribution of products/ingredients requiring PNP clearance Exploration, development and utilization of natural resources

Up to 60% foreign equity FI

a. b.

Financing companies regulated by SEC Investment houses regulated by SEC

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