A separate trust fund is required to be created for each
By Raul J. Palabrica type of pre-need plan that the company may be Philippine Daily Inquirer authorized to sell. First Posted 21:23:00 12/17/2009 The management of the fund may be entrusted by the pre-need company, subject to the approval of the IC, to Filed Under: Economy and Business and a reputable bank?s trust department, a trust company, or Finance, Laws,Litigation & Regulations any entity authorized to perform trust functions in the country. NEXT year, pre-need companies and pre-need To ensure the accomplishment of the objective of the planholders will be governed by new rules and trust fund, the law provides that its assets shall ?at all regulations. times remain for the sole benefit of the planholders.? Last Dec. 4, President Macapagal-Arroyo signed into law No part of the assets can be used for or diverted to any Republic Act No. 9829, also known as the ?Pre-need purpose other than for the exclusive benefit of the Code of the Philippines.? It will take effect 15 days after stockholder. publication in two newspapers of general circulation. Neither can the assets be touched to satisfy the claims From a one-paragraph treatment in the Securities of the company?s creditors, nor can they be considered Regulation Code, the pre-need industry has been given part of the assets of the company that is subject to a covering law of its own that lays down the guidelines distribution in case the company files for insolvency. for its operation and the sanctions that will be imposed Furthermore, the law states that ?contributions to the for any violations that may be committed. trust funds shall not form part of the income or gross In recognition of the nature of pre-need contracts as receipts of the pre-need company and therefore shall not insurance products (rather than securities), Congress be available for dividend declaration.? transferred regulatory responsibility over pre-need companies from the Securities and Exchange Protection Commission to the Insurance Commission (IC). The prompt delivery of benefits to the planholders when Among the notable provisions of the law is the authority their plans mature likewise received particular attention given to the IC to prescribe, pass upon and review the in the law. qualifications and disqualification of directors and If a pre-need company refuses or fails to pay the claim officers of pre-need companies. within 15 days from maturity or due date, the beneficiary Directors will be entitled to collect interest on the proceeds of the Similar to the ?fit and proper? rule that the Bangko plan for the duration of the delay at the rate twice the Sentral applies to bank directors and officers, this power legal interest. will enable the IC to ?maintain the quality of The only excuse allowed for any refusal or failure to pay management of pre-need companies and afford better is if the claim is fraudulent. protection to planholders and beneficiaries.? By way of additional protection for planholders, the Pre- In addition, the law requires pre-need companies to elect need Code allows planholders to file an action in court to into their board of directors at least two independent recover their investments in the company in case it files directors or 20 percent of the members of the board, for insolvency or bankruptcy. whichever is higher. This is a radical departure from the traditional legal To avoid conflicts of interest, the law prohibits directors concept that all collection claims against a company are and officers, in their personal capacity or acting as barred when it undergoes insolvency or bankruptcy agents, to have direct or indirect investments in excess proceedings. of P5 million in any corporation or undertaking in which The directors and officers of the bankrupt company are the pre-need company?s trust fund has an investment or not off the hook though in this kind of situation. financial interest. If the insolvency or bankruptcy is a mere cover-up for The prohibition also applies to their relatives within the fraud or illegality, the planholders may file legal action fourth degree of consanguinity or affinity while the directly against them, including the company?s director or officer concerned holds that position in the controlling stockholders. company. And legal action includes complaints for large-scale It is in the establishment and handling of the trust fund swindling (which is non-bailable), falsification of private that the Pre-need Code takes to heart the protection of documents, false affirmation and a host of other criminal the interests of planholders. cases that can put the erring officer behind bars for the A trust fund is a fund created from the planholders? rest of his rotten life. payments to pay for the cost of benefits and services, Whether or not the Pre-need Code will live up to the termination values payable to planholders, and other government?s expectations remains to be seen. As in all costs necessary to ensure the delivery of benefits or laws, its value lies in its enforcement. services as provided for in the contracts.