I.

Political Law

1. R.A. No. 7941

2. R.A. No. 6770

3. B.P. Blg. 881, as amended

4. RA No. 8436, as amended by RA No. 9369

II. Civil Law

1. R.A. No. 8552

2. R.A. No. 7610, Sec. 10(c) only

3. R.A. No. 9255

4. Recto Law

5. Maceda Law

6. R.A. No. 10142, Sec. 133 only (Note: Include the entire law under Commercial Law)

III. Taxation Law

1. Tariff and Customs Code, as amended by R.A. No. 10863, June 16, 2016

2. R.A. No. 1125, as amended

3. Revised Rules of the Court of Tax Appeals

IV. Commercial Law

1. R.A. No. 7042, Definition of Doing Business only

2. R.A. No. 7653

3. R.A. No. 1405, as amended

4. R.A. No. 8791

5. R.A. No. 10142 (Note: Complete law)

1
 V. Criminal Law

1. R.A. No. 9346

2. Act No. 4103, as amended

3. P.D. No. 968

4. R.A. No. 9344

5. Administrative Circular No. 08-2008

6. P.D. 1613

7. R.A. No. 9775

8. P.D. 11

VI. Remedial Law

1. R.A. No. 8975

2. R.A. No. 8974

3. A.M. No. 12-8-8-SC

VII. Ethics

1. Bar Matter 2012, Rule on Mandatory Legal Aid Service

2
R.A. 7941 Party-List System Act
AN ACT PROVIDING FOR THE ELECTION OF PARTY-LIST REPRESENTATIVES
THROUGH THE PARTY-LIST SYSTEM, AND APPROPRIATING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Title. - This Act shall be known as the "Party-List System Act".

Section 2. Declaration of Policy. - The State shall promote proportional representation in the election of
representatives to the House of Representatives through a party-list system of registered national, regional
and sectoral parties or organizations or coalitions thereof, which will enable Filipino citizens belonging to
the marginalized and underrepresented sectors, organizations and parties, and who lack well-defined
political constituencies but who could contribute to the formulation and enactment of appropriate
legislation that will benefit the nation as a whole, to become members of the House of Representatives.
Towards this end, the State shall develop and guarantee a full, free and open party system in order to
attain the broadest possible representation of party, sectoral or group interests in the House of
Representatives by enhancing their chances to compete for and win seats in the legislature, and shall
provide the simplest scheme possible.

Section 3. Definition of Terms. -

a. The party-list system is a mechanism of proportional representation in the election of

representatives to the House of Representatives from national, regional and sectoral parties or
organizations or coalitions thereof registered with the Commission on Elections (COMELEC).
Component parties or organizations of a coalition may participate independently provided the
coalition of which they form part does not participate in the party-list system.

b. A party means either a political party or a sectoral party or a coalition of parties.

c. A political party refers to an organized group of citizens advocating an ideology or platform,

principles and policies for the general conduct of government and which, as the most immediate
means of securing their adoption, regularly nominates and supports certain of its leaders and
members as candidates for public office.

d. It is a national party when its constituency is spread over the geographical territory of at least a
majority of the regions. It is a regional party when its constituency is spread over the
geographical territory of at least a majority of the cities and provinces comprising the region.

e. A sectoral party refers to an organized group of citizens belonging to any of the sectors
enumerated in Section 5 hereof whose principal advocacy pertains to the special interests and
concerns of their sector.

3
 f. A sectoral organization refers to a group of citizens or a coalition of groups of citizens who share
similar physical attributes or characteristics, employment, interest or concerns.

g. A coalition refers to an aggrupation of duly registered national, regional, sectoral parties or

organizations for political and/or election purposes.

Section 4. Manifestation to Participate in the Party-List System. - Any party, organization, or

coalition already registered with the Commission need not register anew. However, such party,
organization or coalition shall file with the Commission, not later than ninety (90) days before the
election, a manifestation of its desire to participate in the party-list system.

Section 5. Registration. - Any organized group of persons may register as a party, organization or
coalition for purposes of the party-list system by filing with the COMELEC not later than ninety (90)
days before the election a petition verified by its president or secretary stating its desire to participate in
the party-list system as a national, regional or sectoral party or organization or a coalition of such parties
or organizations, attaching thereto its constitution, by-laws, platform or program of government, list of
officers, coalition agreement and other relevant information as the COMELEC may require: provided,
that the sectors shall include labor, peasant, fisherfolk, urban poor, indigenous cultural communities,
elderly, handicapped, women, youth, veterans, overseas workers, and professionals.

The COMELEC shall publish the petition in at least two (2) national newspapers of general circulation.

The COMELEC shall, after due notice and hearing, resolve the petition within fifteen (15) days from the
date it was submitted for decision but in no case not later than sixty (60) days before election.

Section 6. Removal and/or Cancellation of Registration. - The COMELEC may motu proprio or upon
verified complaint of any interested party, remove or cancel, after due notice and hearing, the registration
of any national, regional or sectoral party, organization or coalition on any of the following grounds:

1. It is a religious sect or denomination, organization or association organized for religious

purposes;

2. It advocates violence or unlawful means to seek its goal;

3. It is a foreign party or organization;

4. It is receiving support from any foreign government, foreign political party, foundation,
organization, whether directly or through any of its officers or members or indirectly through
third parties for partisan election purposes;

5. It violates or fails to comply with laws, rules or regulations relating to elections;

6. It declares untruthful statements in its petition;

4
 7. It has ceased to exist for at least one (1) year; or

8. It fails to participate in the last two (2) preceding elections or fails to obtain at least two
percentum (2%) of the votes cast under the party-list system in the two (2) preceding elections for
the constituency in which it has registered.

Section 7. Certified List of Registered Parties. - The COMELEC shall, not later than sixty (60) days
before election, prepare a certified list of national, regional, or sectoral parties, organizations or coalitions
which have applied or who have manifested their desire to participate under the party-list system and
distribute copies thereof to all precincts for posting in the polling places on election day. The names of the
party-list nominees shall not be shown on the certified list.

Section 8. Nominations of Party-List Representatives. - Each registered party, organization or coalition

shall submit to the COMELEC not later than forty-five (45) days before the election a list of names, not
less than five (5) from which party-list representatives shall be chosen in case it obtains the required
number of votes.

A person may be nominated in one (1) list only. Only persons who have given their consent in writing
may be named in the list. The list shall not include any candidate for any elective office or person who
has lost his bid for an elective office in the immediately preceding election. No change of names or
alteration of the order of nominees shall be allowed after the same shall have been submitted to the
COMELEC except in cases where the nominee dies, or withdraws in writing, his nomination, becomes
incapacitated in which case the name of the substitutes nominee shall be placed last in the list. Incumbent
sectoral representatives in the House of Representatives who are nominated in the party-list system shall
not be considered resigned.

Section 9. Qualification of Party-List Nominees. - No person shall be nominated as party-list

representative unless he is a natural born citizen of the Philippines, a registered voter, a resident of the
Philippines for a period of not less than one (1) year immediately preceding the day of the election, able
to read and write, bona fide member of the party or organization which he seeks to represent for at least
ninety (90) days preceding the day of the election, and is at least twenty-five (25) years of age on the day
of the election. In case of a nominee of the youth sector, he must at least be twenty-five (25) but not more
than thirty (30) years of age on the day of the election. Any youth sectoral representative who attains the
age of thirty during his term shall be allowed to continue until the expiration of his term.

Section 10. Manner of Voting. - Every voter shall be entitled to two (2) votes. The first is a vote for
candidate for member of the House of Representatives in his legislative district, and the second, a vote for
the party, organization, or coalition he wants represented in the House of Representatives: provided, that a

5
vote cast for a party, sectoral organization, or coalition not entitled to be voted for shall not be counted:
provided, finally that the first election under the party-list system shall be held in May 1998. The
COMELEC shall undertake the necessary information campaign for purposes of educating the electorate
on the matter of the party-list system.

Section 11. Number of Party-List Representatives. - The party-list representatives shall constitute
twenty percentum (20%) of the total number of the members of the House of Representatives including
those under the party-list. For purposes of the May 1998 elections, the first five (5) major political parties
on the basis of party representation in the House of Representatives at the start of the Tenth Congress of
the Philippines shall not be entitled to participate in the party-list system. In determining the allocation of
seats for the second vote, the following procedure shall be observed: The parties, organizations, and
coalitions shall be ranked from the highest to the lowest based on the number of votes garnered during the
elections. The parties, organizations, and coalitions receiving at least two percent (2%) of the total votes
cast for the party-list system shall be entitled to one seat each: provided, that those garnering more than
two percent (2%) of the votes shall be entitled to additional seats in proportion to their total number of
votes: provided, finally, that each party, organization, or coalition shall be entitled to not more than three
(3) seats.

Section 12. Procedure in Allocating Seats for Party-List Representatives. - The COMELEC shall tally
all the votes for the parties, organizations, or coalitions on a nationwide basis, rank them according to the
number of votes received and allocate party-list representatives proportionately according to the
percentage of votes obtained by each party, organization, or coalition as against the total nationwide votes
cast for the party-list system.

Section 13. How Party-List Representatives are Chosen. - Party-list representatives shall be
proclaimed by the COMELEC based on the list of names submitted by the respective parties,
organizations, or coalitions to the COMELEC according to their ranking in the said list.

Section 14. Term of Office. - Party-list representatives shall be elected for a term of three (3) years
which shall begin, unless otherwise provided by law, at noon on the thirtieth day of June next following
their election. No party-list representatives shall serve for more than three (3) consecutive terms.
Voluntary renunciation of the office for any length of time shall not be considered as an interruption in
the continuity of his service for the full term for which he was elected.

Section 15. Change of Affiliation Effect. - Any elected party-list representative who changes his
political party or sectoral affiliation during his term of office shall forfeit his seat: provided, that if he

6
changes his political party or sectoral affiliation within six (6) months before an election, he shall not be
eligible for nomination as party-list representative under his new party or organization.

Section 16. Vacancy. - In case of vacancy in seats reserved for party-list representatives, the vacancy
shall be automatically filled by the next representative from the list of nominees in the order submitted to
the COMELEC by the same party, organization, or coalition, who shall serve for the unexpired term. If
the list is exhausted, the party, organization, or coalition concerned shall submit additional nominees.

Section 17. Rights of Party-List Representatives. - Party-list representatives shall be entitled to the
same salaries and emoluments as regular members of the House of Representatives.

Section 18. Rules and Regulations. - The COMELEC shall promulgate the necessary rules and
regulations as may be necessary to carry out the purpose of this Act.

Section 19. Appropriations. - The amount necessary for the implementation of this Act shall be provided
in the regular appropriations for the Commission on Elections starting fiscal year 1996 under the General
Appropriations Act. Starting 1995, the COMELEC is hereby authorized to utilize savings and other
available funds for purposes of its information campaign on the party-list system.

Section 20. Separability Clause. - If any part of this Act is held invalid or unconstitutional, the other
parts or provisions thereof shall remain valid and effective.

Section 21. Repealing Clause. - All laws, decrees, executive orders, rules and regulations, or parts
thereof, inconsistent with the provisions of this Act are hereby repealed.

Section 22. Effectivity. - This Act shall take effect fifteen (15) days after its publication in a newspaper
of general circulation.

Approved: March 3, 1995

7
R.A. 6770 Ombudsman Act of 1989
AN ACT PROVIDING FOR THE FUNCTIONAL AND STRUCTURAL ORGANIZATION OF THE
OFFICE OF THE OMBUDSMAN, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

Section 1. Title. This Act shall be known as "The Ombudsman Act of 1989".

Section 2. Declaration of Policy. The State shall maintain honesty and integrity in the public service
and take positive and effective measures against graft and corruption.
Public office is a public trust. Public officers and employees must at all times be accountable to the people,
serve them with utmost responsibility, integrity, loyalty, efficiency, act with patriotism and justice and lead
modest lives.

Section 3. Office of the Ombudsman. The Office of the Ombudsman shall include the Office of the
Overall Deputy, the Office of the Deputy for Luzon, the Office of the Deputy for the Visayas, the Office of
the Deputy for Mindanao, the Office of the Deputy for the Armed Forces, and the Office of the Special
Prosecutor. The President may appoint other Deputies as the necessity for it may arise, as recommended by
the Ombudsman.

Section 4. Appointment. The Ombudsman and his Deputies, including the Special Prosecutor, shall be
appointed by the President from a list of at least twenty-one (21) nominees prepared by the Judicial and Bar
Council, and from a list of three (3) nominees for each vacancy thereafter, which shall be filled within three
(3) months after it occurs, each of which list shall be published in a newspaper of general circulation.

In the organization of the Office of the Ombudsman for filling up of positions therein, regional, cultural or
ethnic considerations shall be taken into account to the end that the Office shall be as much as possible
representative of the regional, ethnic and cultural make-up of the Filipino nation.
Section 5. Qualifications. The Ombudsman and his Deputies, including the Special Prosecutor, shall be
natural-born citizens of the Philippines, at least forty (40) years old, of recognized probity and
independence, members of the Philippine Bar, and must not have been candidates for any elective national
or local office in the immediately preceding election whether regular or special. The Ombudsman must
have, for ten (10) years or more, been a judge or engaged in the practice of law in the Philippines.
Section 6. Rank and Salary. The Ombudsman and his Deputies shall have the same ranks, salaries and
privileges as the Chairman and members, respectively, of a Constitutional Commission. Their salaries shall
not be decreased during their term of office.
The members of the prosecution, investigation and legal staff of the Office of the Ombudsman shall receive
salaries which shall not be less than those given to comparable positions in any office in the Government.

Section 7. Term of Office. The Ombudsman and his Deputies, including the Special Prosecutor, shall
serve for a term of seven (7) years without reappointment.

Section 8. Removal; Filling of Vacancy.

(1) In accordance with the provisions of Article XI of the Constitution, the Ombudsman may be removed
from office on impeachment for, and conviction of, culpable violation of the Constitution, treason, bribery,
graft and corruption, other high crimes, or betrayal of public trust.
(2) A Deputy or the Special Prosecutor, may be removed from office by the President for any of the grounds
provided for the removal of the Ombudsman, and after due process.
(3) In case of vacancy in the Office of the Ombudsman due to death, resignation, removal or permanent
disability of the incumbent Ombudsman, the Overall Deputy shall serve as Acting Ombudsman in a
concurrent capacity until a new Ombudsman shall have been appointed for a full term.n case the Overall

8
Deputy cannot assume the role of Acting Ombudsman, the President may designate any of the Deputies, or
the Special Prosecutor, as Acting Ombudsman.
(4) In case of temporary absence or disability of the Ombudsman, the Overall Deputy shall perform the
duties of the Ombudsman until the Ombudsman returns or is able to perform his duties.

Section 9. Prohibitions and Disqualifications. The Ombudsman, his Deputies and the Special
Prosecutor shall not, during their tenure, hold any other office or employment. They shall not, during said
tenure, directly or indirectly practice any other profession, participate in any business, or be financially
interested in any contract with, or in any franchise, or special privilege granted by the Government or any
subdivision, agency or instrumentality thereof, including government-owned or controlled corporations or
their subsidiaries. They shall strictly avoid conflict of interest in the conduct of their office. They shall not
be qualified to run for any office in the election immediately following their cessation from office. They
shall not be allowed to appear or practice before the Ombudsman for two (2) years following their cessation
from office.
No spouse or relative by consanguinity or affinity within the fourth civil degree and no law, business or
professional partner or associate of the Ombudsman, his Deputies or Special Prosecutor within one (1) year
preceding the appointment may appear as counsel or agent on any matter pending before the Office of the
Ombudsman or transact business directly or indirectly therewith.
This disqualification shall apply during the tenure of the official concerned. This disqualification likewise
extends to the law, business or professional firm for the same period.

Section 10. Disclosure of Relationship. It shall be the duty of the Ombudsman, his Deputies, including
the Special Prosecutor to make under oath, to the best of their knowledge and/or information, a public
disclosure of the identities of, and their relationship with the persons referred to in the preceding section.
The disclosure shall be filed with the Office of the President and the Office of the Ombudsman before the
appointee assumes office and every year thereafter. The disclosures made pursuant to this section shall form
part of the public records and shall be available to any person or entity upon request.

Section 11. Structural Organization. The authority and responsibility for the exercise of the mandate
of the Office of the Ombudsman and for the discharge of its powers and functions shall be vested in the
Ombudsman, who shall have supervision and control of the said office.
(1) The Office of the Ombudsman may organize such directorates for administration and allied services as
may be necessary for the effective discharge of its functions. Those appointed as directors or heads shall
have the rank and salary of line bureau directors.
(2) The Office of the Overall Deputy shall oversee and administer the operations of the different offices
under the Office of Ombudsman.t shall likewise perform such other functions and duties assigned to it by
the Ombudsman.
(3) The Office of the Special Prosecutor shall be composed of the Special Prosecutor and his prosecution
staff. The Office of the Special Prosecutor shall be an organic component of the Office of the Ombudsman
and shall be under the supervision and control of the Ombudsman.
(4) The Office of the Special Prosecutor shall, under the supervision and control and upon the authority of
the Ombudsman, have the following powers:
(a) To conduct preliminary investigation and prosecute criminal cases within the jurisdiction of the
Sandiganbayan;
(b) To enter into plea bargaining agreements; and
(c) To perform such other duties assigned to it by the Ombudsman.
The Special Prosecutor shall have the rank and salary of a Deputy Ombudsman.
(5) The position structure and staffing pattern of the Office of the Ombudsman, including the Office of the
Special Prosecutor, shall be approved and prescribed by the Ombudsman. The Ombudsman shall appoint
all officers and employees of the Office of the Ombudsman, including those of the Office of the Special
Prosecutor, in accordance with the Civil Service Law, rules and regulations.

9
Section 12. Official Stations. The Ombudsman, the Overall Deputy, the Deputy for Luzon, and the
Deputy for the Armed Forces shall hold office in Metropolitan Manila; the Deputy for the Visayas, in Cebu
City; and the Deputy for Mindanao, in Davao City. The Ombudsman may transfer their stations within their
respective geographical regions, as public interest may require.

Section 13. Mandate. The Ombudsman and his Deputies, as protectors of the people, shall act promptly
on complaints filed in any form or manner against officers or employees of the Government, or of any
subdivision, agency or instrumentality thereof, including government-owned or controlled corporations,
and enforce their administrative, civil and criminal liability in every case where the evidence warrants in
order to promote efficient service by the Government to the people.

Section 14. Restrictions. No writ of injunction shall be issued by any court to delay an investigation
being conducted by the Ombudsman under this Act, unless there is a prima facie evidence that the subject
matter of the investigation is outside the jurisdiction of the Office of the Ombudsman.
No court shall hear any appeal or application for remedy against the decision or findings of the Ombudsman,
except the Supreme Court, on pure question of law.

Section 15. Powers, Functions and Duties. The Office of the Ombudsman shall have the following
powers, functions and duties:
(1) Investigate and prosecute on its own or on complaint by any person, any act or omission of any public
officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or
inefficient.t has primary jurisdiction over cases cognizable by the Sandiganbayan and, in the exercise of
this primary jurisdiction, it may take over, at any stage, from any investigatory agency of Government, the
investigation of such cases;
(2) Direct, upon complaint or at its own instance, any officer or employee of the Government, or of any
subdivision, agency or instrumentality thereof, as well as any government-owned or controlled corporations
with original charter, to perform and expedite any act or duty required by law, or to stop, prevent, and
correct any abuse or impropriety in the performance of duties;
(3) Direct the officer concerned to take appropriate action against a public officer or employee at fault or
who neglect to perform an act or discharge a duty required by law, and recommend his removal, suspension,
demotion, fine, censure, or prosecution, and ensure compliance therewith; or enforce its disciplinary
authority as provided in Section 21 of this Act: provided, that the refusal by any officer without just cause
to comply with an order of the Ombudsman to remove, suspend, demote, fine, censure, or prosecute an
officer or employee who is at fault or who neglects to perform an act or discharge a duty required by law
shall be a ground for disciplinary action against said officer;
(4) Direct the officer concerned, in any appropriate case, and subject to such limitations as it may provide
in its rules of procedure, to furnish it with copies of documents relating to contracts or transactions entered
into by his office involving the disbursement or use of public funds or properties, and report any irregularity
to the Commission on Audit for appropriate action;
(5) Request any government agency for assistance and information necessary in the discharge of its
responsibilities, and to examine, if necessary, pertinent records and documents;
(6) Publicize matters covered by its investigation of the matters mentioned in paragraphs (1), (2), (3) and
(4) hereof, when circumstances so warrant and with due prudence: provided, that the Ombudsman under its
rules and regulations may determine what cases may not be made public: provided, further, that any
publicity issued by the Ombudsman shall be balanced, fair and true;
(7) Determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption in the
Government, and make recommendations for their elimination and the observance of high standards of
ethics and efficiency;
(8) Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any investigation
or inquiry, including the power to examine and have access to bank accounts and records;

10
(9) Punish for contempt in accordance with the Rules of Court and under the same procedure and with the
same penalties provided therein;
(10) Delegate to the Deputies, or its investigators or representatives such authority or duty as shall ensure
the effective exercise or performance of the powers, functions, and duties herein or hereinafter provided;
(11) Investigate and initiate the proper action for the recovery of ill-gotten and/or unexplained wealth
amassed after February 25, 1986 and the prosecution of the parties involved therein.
The Ombudsman shall give priority to complaints filed against high ranking government officials and/or
those occupying supervisory positions, complaints involving grave offenses as well as complaints involving
large sums of money and/or properties.

Section 16. Applicability. The provisions of this Act shall apply to all kinds of malfeasance,
misfeasance, and non-feasance that have been committed by any officer or employee as mentioned in
Section 13 hereof, during his tenure of office.

Section 17. Immunities. In all hearings, inquiries, and proceedings of the Ombudsman, including
preliminary investigations of offenses, nor person subpoenaed to testify as a witness shall be excused from
attending and testifying or from producing books, papers, correspondence, memoranda and/or other records
on the ground that the testimony or evidence, documentary or otherwise, required of him, may tend to
incriminate him or subject him to prosecution: provided, that no person shall be prosecuted criminally for
or on account of any matter concerning which he is compelled, after having claimed the privilege against
self-incrimination, to testify and produce evidence, documentary or otherwise.
Under such terms and conditions as it may determine, taking into account the pertinent provisions of the
Rules of Court, the Ombudsman may grant immunity from criminal prosecution to any person whose
testimony or whose possession and production of documents or other evidence may be necessary to
determine the truth in any hearing, inquiry or proceeding being conducted by the Ombudsman or under its
authority, in the performance or in the furtherance of its constitutional functions and statutory objectives.
The immunity granted under this and the immediately preceding paragraph shall not exempt the witness
from criminal prosecution for perjury or false testimony nor shall he be exempt from demotion or removal
from office.
Any refusal to appear or testify pursuant to the foregoing provisions shall be subject to punishment for
contempt and removal of the immunity from criminal prosecution.

Section 18. Rules of Procedure.

(1) The Office of the Ombudsman shall promulgate its rules of procedure for the effective exercise or
performance of its powers, functions, and duties.
(2) The rules of procedure shall include a provision whereby the Rules of Court are made suppletory.
(3) The rules shall take effect after fifteen (15) days following the completion of their publication in the
Official Gazette or in three (3) newspapers of general circulation in the Philippines, one of which is printed
in the national language.

Section 19. Administrative Complaints. The Ombudsman shall act on all complaints relating, but not
limited to acts or omissions which:
(1) Are contrary to law or regulation;
(2) Are unreasonable, unfair, oppressive or discriminatory;
(3) Are inconsistent with the general course of an agency's functions, though in accordance with law;
(4) Proceed from a mistake of law or an arbitrary ascertainment of facts;
(5) Are in the exercise of discretionary powers but for an improper purpose; or
(6) Are otherwise irregular, immoral or devoid of justification.
Section 20. Exceptions. The Office of the Ombudsman may not conduct the necessary investigation of
any administrative act or omission complained of if it believes that:
(1) The complainant has an adequate remedy in another judicial or quasi-judicial body;

11
(2) The complaint pertains to a matter outside the jurisdiction of the Office of the Ombudsman;
(3) The complaint is trivial, frivolous, vexatious or made in bad faith;
(4) The complainant has no sufficient personal interest in the subject matter of the grievance; or
(5) The complaint was filed after one (1) year from the occurrence of the act or omission complained of.

Section 21. Official Subject to Disciplinary Authority; Exceptions. The Office of the Ombudsman shall
have disciplinary authority over all elective and appointive officials of the Government and its subdivisions,
instrumentalities and agencies, including Members of the Cabinet, local government, government-owned
or controlled corporations and their subsidiaries, except over officials who may be removed only by
impeachment or over Members of Congress, and the Judiciary.

Section 22. Investigatory Power. The Office of the Ombudsman shall have the power to investigate any
serious misconduct in office allegedly committed by officials removable by impeachment, for the purpose
of filing a verified complaint for impeachment, if warranted.
In all cases of conspiracy between an officer or employee of the government and a private person, the
Ombudsman and his Deputies shall have jurisdiction to include such private person in the investigation and
proceed against such private person as the evidence may warrant. The officer or employee and the private
person shall be tried jointly and shall be subject to the same penalties and liabilities.

Section 23. Formal Investigation.

(1) Administrative investigations conducted by the Office of the Ombudsman shall be in accordance with
its rules of procedure and consistent with due process.
(2) At its option, the Office of the Ombudsman may refer certain complaints to the proper disciplinary
authority for the institution of appropriate administrative proceedings against erring public officers or
employees, which shall be determined within the period prescribed in the civil service law. Any delay
without just cause in acting on any referral made by the Office of the Ombudsman shall be a ground for
administrative action against the officers or employees to whom such referrals are addressed and shall
constitute a graft offense punishable by a fine of not exceeding Five thousand pesos (P5,000.00).
(3) In any investigation under this Act the Ombudsman may: (a) enter and inspect the premises of any
office, agency, commission or tribunal; (b) examine and have access to any book, record, file, document or
paper; and (c) hold private hearings with both the complaining individual and the official concerned.

Section 24. Preventives Suspension. The Ombudsman or his Deputy may preventively suspend any
officer or employee under his authority pending an investigation, if in his judgment the evidence of guilt is
strong, and (a) the charge against such officer or employee involves dishonesty, oppression or grave
misconduct or neglect in the performance of duty; (b) the charges would warrant removal from the service;
or (c) the respondent's continued stay in office may prejudice the case filed against him.
The preventive suspension shall continue until the case is terminated by the Office of the Ombudsman but
not more than six (6) months, without pay, except when the delay in the disposition of the case by the Office
of the Ombudsman is due to the fault, negligence or petition of the respondent, in which case the period of
such delay shall not be counted in computing the period of suspension herein provided.

Section 25. Penalties.

(1) In administrative proceedings under Presidential Decree No. 807, the penalties and rules provided
therein shall be applied.
(2) In other administrative proceedings, the penalty ranging from suspension without pay for one (1) year
to dismissal with forfeiture of benefits or a fine ranging from Five thousand pesos (P5,000.00) to twice the
amount malversed, illegally taken or lost, or both at the discretion of the Ombudsman, taking into
consideration circumstances that mitigate or aggravate the liability of the officer or employee found guilty
of the complaint or charges.

12
Section 26. Inquiries.
(1) The Office of the Ombudsman shall inquire into acts or omissions of a public officer, employee, office
or agency which, from the reports or complaints it has received, the Ombudsman or his Deputies consider
to be:
(a) contrary to law or regulation;
(b) unreasonable, unfair, oppressive, irregular or inconsistent with the general course of the operations and
functions of a public officer, employee, office or agency;
(c) an error in the application or interpretation of law, rules or regulations, or a gross or palpable error in
the appreciation of facts;
(d) based on improper motives or corrupt considerations;
(e) unclear or inadequately explained when reasons should have been revealed; or
(f) inefficient performed or otherwise objectionable.
(2) The Officer of the Ombudsman shall receive complaints from any source in whatever form concerning
an official act or omission.t shall act on the complaint immediately and if it finds the same entirely baseless,
it shall dismiss the same and inform the complainant of such dismissal citing the reasons therefor.f it finds
a reasonable ground to investigate further, it shall first furnish the respondent public officer or employee
with a summary of the complaint and require him to submit a written answer within seventy-two (72) hours
from receipt thereof.f the answer is found satisfactory, it shall dismiss the case.
(3) When the complaint consists in delay or refusal to perform a duty required by law, or when urgent action
is necessary to protect or preserve the rights of the complainant, the Office of the Ombudsman shall take
steps or measures and issue such orders directing the officer, employee, office or agency concerned to:
(a) expedite the performance of duty;
(b) cease or desist from the performance of a prejudicial act;
(c) correct the omission;
(d) explain fully the administrative act in question; or
(e) take any other steps as may be necessary under the circumstances to protect and preserve the rights of
the complainant.
(4) Any delay or refusal to comply with the referral or directive of the Ombudsman or any of his Deputies,
shall constitute a ground for administrative disciplinary action against the officer or employee to whom it
was addressed.

Section 27. Effectivity and Finality of Decisions. (1) All provisionary orders of the Office of the
Ombudsman are immediately effective and executory.
A motion for reconsideration of any order, directive or decision of the Office of the Ombudsman must be
filed within five (5) days after receipt of written notice and shall be entertained only on any of the following
grounds:
(1) New evidence has been discovered which materially affects the order, directive or decision;
(2) Errors of law or irregularities have been committed prejudicial to the interest of the movant. The motion
for reconsideration shall be resolved within three (3) days from filing: provided, that only one motion for
reconsideration shall be entertained.
Findings of fact by the Officer of the Ombudsman when supported by substantial evidence are conclusive.
Any order, directive or decision imposing the penalty of public censure or reprimand, suspension of not
more than one (1) month's salary shall be final and unappealable.
In all administrative disciplinary cases, orders, directives, or decisions of the Office of the Ombudsman
may be appealed to the Supreme Court by filing a petition for certiorari within ten (10) days from receipt
of the written notice of the order, directive or decision or denial of the motion for reconsideration in
accordance with Rule 45 of the Rules of Court.
The above rules may be amended or modified by the Office of the Ombudsman as the interest of justice
may require.

13
Section 28. Investigation in Municipalities, Cities and Provinces. The Office of the Ombudsman may
establish offices in municipalities, cities and provinces outside Metropolitan Manila, under the immediate
supervision of the Deputies for Luzon, Visayas and Mindanao, where necessary as determined by the
Ombudsman. The investigation of complaints may be assigned to the regional or sectoral deputy concerned
or to a special investigator who shall proceed in accordance with the rules or special instructions or
directives of the Office of the Ombudsman. Pending investigation the deputy or investigator may issue
orders and provisional remedies which are immediately executory subject to review by the Ombudsman.
Within three (3) days after concluding the investigation, the deputy or investigator shall transmit, together
with the entire records of the case, his report and conclusions to the Office of the Ombudsman. Within five
(5) days after receipt of said report, the Ombudsman shall render the appropriate order, directive or decision.

Section 29. Change of Unjust Laws. If the Ombudsman believes that a law or regulation is unfair or
unjust, he shall recommend to the President and to Congress the necessary changes therein or the repeal
thereof.

Section 30. Transmittal/Publication of Decision. In every case where the Ombudsman has reached a
decision, conclusion or recommendation adverse to a public official or agency, he shall transmit his
decision, conclusion, recommendation or suggestion to the head of the department, agency or
instrumentality, or of the province, city or municipality concerned for such immediate action as may be
necessary. When transmitting his adverse decision, conclusion or recommendation, he shall, unless excused
by the agency or official affected, include the substance of any statement the public agency or official may
have made to him by way of explaining past difficulties with or present rejection of the Ombudsman's
proposals.

Section 31. Designation of Investigators and Prosecutors. The Ombudsman may utilize the personnel
of his office and/or designate or deputize any fiscal, state prosecutor or lawyer in the government service
to act as special investigator or prosecutor to assist in the investigation and prosecution of certain cases.
Those designated or deputized to assist him herein provided shall be under his supervision and control.
The Ombudsman and his investigators and prosecutors, whether regular members of his staff or designated
by him as herein provided, shall have authority to administer oaths, to issue subpoena and subpoena duces
tecum, to summon and compel witnesses to appear and testify under oath before them and/or bring books,
documents and other things under their control, and to secure the attendance or presence of any absent or
recalcitrant witness through application before the Sandiganbayan or before any inferior or superior court
having jurisdiction of the place where the witness or evidence is found.

Section 32. Rights and Duties of Witness.

(1) A person required by the Ombudsman to provide the information shall be paid the same fees and travel
allowances as are extended to witnesses whose attendance has been required in the trial courts. Upon request
of the witness, the Ombudsman shall also furnish him such security for his person and his family as may
be warranted by the circumstances. For this purpose, the Ombudsman may, at its expense, call upon any
police or constabulary unit to provide the said security.
(2) A person who, with or without service or compulsory process, provides oral or documentary information
requested by the Ombudsman shall be accorded the same privileges and immunities as are extended to
witnesses in the courts, and shall likewise be entitled to the assistance of counsel while being questioned.
(3) If a person refuses to respond to the Ombudsman's or his Deputy's subpoena, or refuses to be examined,
or engages in obstructive conduct, the Ombudsman or his Deputy shall issue an order directing the person
to appear before him to show cause why he should not be punished for contempt. The contempt proceedings
shall be conducted pursuant to the provisions of the Rules of Court.

Section 33. Duty to Render Assistance to the Office of the Ombudsman. Any officer or employee of
any department, bureau or office, subdivision, agency or instrumentality of the Government, including

14
government-owned or controlled corporations and local governments, when required by the Ombudsman,
his Deputy or the Special Prosecutor shall render assistance to the Office of the Ombudsman.

Section 34. Annual Report. The Office of the Ombudsman shall render an annual report of its activities
and performance to the President and to Congress to be submitted within thirty (30) days from the start of
the regular session of Congress.

Section 35. Malicious Prosecution. Any person who, actuated by malice or gross bad faith, files a
completely unwarranted or false complaint against any government official or employee shall be subject to
a penalty of one (1) month and one (1) day to six (6) months imprisonment and a fine not exceeding Five
thousand pesos (P5,000.00).

Section 36. Penalties for Obstruction. Any person who willfully obstructs or hinders the proper exercise
of the functions of the Office of the Ombudsman or who willfully misleads or attempts to mislead the
Ombudsman, his Deputies and the Special Prosecutor in replying to their inquiries shall be punished by a
fine of not exceeding Five thousand pesos (P5,000.00).

Section 37. Franking Privilege. All official mail matters and telegrams of the Ombudsman addressed
for delivery within the Philippines shall be received, transmitted, and delivered free of charge: provided,
that such mail matters when addressed to private persons or nongovernment offices shall not exceed one
hundred and twenty (120) grams. All mail matters and telegrams sent through government telegraph
facilities containing complaints to the Office of the Ombudsman shall be transmitted free of charge,
provided that the telegram shall contain not more than one hundred fifty (150) words.

Section 38. Fiscal Autonomy. The Office of the Ombudsman shall enjoy fiscal autonomy.
Appropriations for the Office of the Ombudsman may not be reduced below the amount appropriated for
the previous years and, after approval, shall be automatically and regularly released.

Section 39. Appropriations. The appropriation for the Office of the Special Prosecutor in the current
General Appropriations Act is hereby transferred to the Office of the Ombudsman. Thereafter, such sums
as may be necessary shall be included in the annual General Appropriations Act.

Section 40. Separability Clause. If any provision of this Act is held unconstitutional, other provisions
not affected thereby shall remain valid and binding.

Section 41. Repealing Clause. All laws, presidential decrees, letters of instructions, executive orders,
rules and regulations insofar as they are inconsistent with this Act, are hereby repealed or amended as the
case may be.

Section 42. Effectivity. This Act shall take effect after fifteen (15) days following its publication in the
Official Gazette or in three (3) newspapers of general circulation in the Philippines.
Approved: November 17, 1989.

15
B.P. 881 OMNIBUS ELECTION CODE OF THE PHILIPPINES

ARTICLE I
GENERAL PROVISIONS

Section 1. Title. - This Act shall be known and cited as the "Omnibus Election Code of the Philippines."

Section 2. Applicability. - This Code shall govern all election of public officers and, to the extent
appropriate, all referenda and plebiscites.

Section 3. Election and campaign periods. - Unless otherwise fixed in special cases by the Commission
on Elections, which hereinafter shall be referred to as the Commission, the election period shall
commence ninety days before the day of the election and shall end thirty days thereafter.

The period of campaign shall be as follows:

1. Presidential and Vice-Presidential Election - 90 days;

2. Election of Members of the Batasang Pambansa and Local Election - 45 days; and

3. Barangay Election - 15 days.

The campaign periods shall not include the day before and the day of the election.

However, in case of special elections under Article VIII, Section 5, Subsection (2) of the Constitution, the
campaign period shall be forty-five days.

Section 4 Obligation to register and vote. - It shall be the obligation of every citizen qualified to vote to
register and cast his vote.

Section 5 Postponement of election. - When for any serious cause such as violence, terrorism, loss or
destruction of election paraphernalia or records, force majeure, and other analogous causes of such a
nature that the holding of a free, orderly and honest election should become impossible in any political
subdivision, the Commission, motu proprio or upon a verified petition by any interested party, and after
due notice and hearing, whereby all interested parties are afforded equal opportunity to be heard, shall
postpone the election therein to a date which should be reasonably close to the date of the election not
held, suspended or which resulted in a failure to elect but not later than thirty days after the cessation of
the cause for such postponement or suspension of the election or failure to elect.

Section 6 Failure of election. - If, on account of force majeure, violence, terrorism, fraud, or other
analogous causes the election in any polling place has not been held on the date fixed, or had been
suspended before the hour fixed by law for the closing of the voting, or after the voting and during the
preparation and the transmission of the election returns or in the custody or canvass thereof, such election
results in a failure to elect, and in any of such cases the failure or suspension of election would affect the
result of the election, the Commission shall, on the basis of a verified petition by any interested party and
after due notice and hearing, call for the holding or continuation of the election not held, suspended or
which resulted in a failure to elect on a date reasonably close to the date of the election not held,

16
suspended or which resulted in a failure to elect but not later than thirty days after the cessation of the
cause of such postponement or suspension of the election or failure to elect.

Section 7 Call of special election. -

(1) In case a vacancy arises in the Batasang Pambansa eighteen months or more before a regular
election, the Commission shall call a special election to be held within sixty days after the
vacancy occurs to elect the Member to serve the unexpired term.

(2) In case of the dissolution of the Batasang Pambansa, the President shall call an election which
shall not be held earlier than forty-five nor later than sixty days from the date of such dissolution.

The Commission shall send sufficient copies of its resolution for the holding of the election to its
provincial election supervisors and election registrars for dissemination, who shall post copies
thereof in at least three conspicuous places preferably where public meetings are held in each city
or municipality affected.

Section 8 Election Code to be available in polling places. - A printed copy of this Code in English or in
the national language shall be provided and be made available by the Commission in every polling place,
in order that it may be readily consulted by any person in need thereof on the registration, revision and
election days.

Section 9 Official mail and telegram relative to elections. - Papers connected with the election and
required by this Code to be sent by public officers in the performance of their election duties shall be free
of postage and sent by registered special delivery mail. Telegrams of the same nature shall likewise be
transmitted free of charge by government telecommunications and similar facilities.

It shall be the duty of the Postmaster General, the Director of the Bureau of Telecommunications, and the
managers of private telecommunication companies to transmit immediately and in preference to all other
communications or telegrams messages reporting election results and such other messages or
communications which the Commission may require or may be necessary to ensure free, honest and
orderly elections.

Section 10 Election expenses. - Except in barangay elections, such expenses as may be necessary and
reasonable in connection with the elections, referenda, plebiscites and other similar exercises shall be paid
by the Commission. The Commission may direct that in the provinces, cities, or municipalities, the
election expenses chargeable to the Commission be advanced by the province, city or municipality
concerned subject to reimbursement by the Commission upon presentation of the proper bill.

Funds needed by the Commission to defray the expenses for the holding of regular and special elections,
referenda and plebiscites shall be provided in the regular appropriations of the Commission which, upon
request, shall immediately be released to the Commission. In case of deficiency, the amount so provided
shall be augmented from the special activities funds in the general appropriations act and from those
specifically appropriated for the purpose in special laws.

Section 11 Failure to assume office. - The office of any official elected who fails or refuses to take his
oath of office within six months from his proclamation shall be considered vacant, unless said failure is
for a cause or causes beyond his control.

17
Section 12 Disqualifications. - Any person who has been declared by competent authority insane or
incompetent, or has been sentenced by final judgment for subversion, insurrection, rebellion or for any
offense for which he has been sentenced to a penalty of more than eighteen months or for a crime
involving moral turpitude, shall be disqualified to be a candidate and to hold any office, unless he has
been given plenary pardon or granted amnesty.

This disqualifications to be a candidate herein provided shall be deemed removed upon the declaration by
competent authority that said insanity or incompetence had been removed or after the expiration of a
period of five years from his service of sentence, unless within the same period he again becomes
disqualified.

ARTICLE II
ELECTION OF PRESIDENT AND VICE-PRESIDENT

Section 13. Regular election for President and Vice-President. - The regular election for President and
Vice-President of the Philippines shall be held on the first Monday of May Nineteen hundred eighty
seven (1987) and on the same day every six years thereafter. The President-elect and the Vice-President-
elect shall assume office at twelve o'clock noon on the thirtieth day of June next following the election
and shall end at noon of the same date, six years thereafter when the term of his successor shall begin.

Section 14 Special election for President and Vice-President. - In case a vacancy occurs for the Office of
the President and Vice-President, the Batasang Pambansa shall, at ten o'clock in the morning of the third
day after the vacancy occurs, convene in accordance with its rules without need of a call and within seven
days enact a law calling for a special election to elect a President and a Vice-President to be held not
earlier than forty-five days nor later than sixty days from the time of such call. The bill calling such
special election shall be deemed certified under paragraph (2), Section 19, Article VIII of the Constitution
and shall become law upon its approval on third reading by the Batasang Pambansa. Appropriations for
the special election shall be charged against any current appropriations and shall be exempt from the
requirements of paragraph (4), Section 16 of Article VIII of the Constitution. The convening of the
Batasang Pambansa cannot be suspended nor the special election postponed. No special election shall be
called if the vacancy occurs within seventy days before the date of the presidential election of 1987.

Section 15 Canvass of votes for President and Vice-President by the provincial or city board of
canvassers. - The provincial, city, or district boards of canvassers in Metropolitan Manila, as the case may
be, shall meet not later than six o'clock in the evening on election day to canvass the election returns that
may have already been received by them, respectively. It shall meet continuously from day to day until
the canvass is completed, but may adjourn only for the purpose of awaiting the other election returns.
Each time the board adjourns, it shall make a total of all the votes cast for each candidate for President
and for Vice-President, duly authenticated by the signatures and thumbmarks of all the members of the
provincial, city or district board of canvassers, furnishing the Commission in Manila by the fastest means
of communication a copy thereof, and making available the data contained therein to mass media and
other interested parties. Upon the completion of the canvass, the board shall prepare a certificate of
canvass showing the votes received by each candidate for the office of the President and for Vice-
President, duly authenticated by the signatures and thumbmarks of all the members of the provincial, city
or district board of canvassers. Upon the completion of the certificate of canvass, the board shall certify
and transmit the said certificate of canvass to the Speaker of the Batasang Pambansa.

The provincial, city and district boards of canvassers shall prepare the certificate of canvass for the
election of President and Vice-President, supported by a statement of votes by polling place, in
quintuplicate by the use of carbon papers or such other means as the Commission shall prescribe to the

18
end that all five copies shall be legibly produced in one handwriting. The five copies of the certificate of
canvass must bear the signatures and thumbmarks of all the members of the board. Upon the completion
of these certificates and statements, they shall be enclosed in envelopes furnished by the Commission and
sealed, and immediately distributed as follows: the original copy shall be enclosed and sealed in the
envelope directed to the Speaker and delivered to him at the Batasang Pambansa by the fastest possible
means; the second copy shall likewise be enclosed and sealed in the envelope directed to the Commission;
the third copy shall be retained by the provincial election supervisor, in the case of the provincial board of
canvassers, and by the city election registrar, in the case of the city board of canvassers; and one copy
each to the authorized representatives of the ruling party and the dominant opposition political party.
Failure to comply with the requirements of this section shall constitute an election offense.

Section 16 Counting of votes for President and Vice-President by the Batasang Pambansa. - The
certificates of canvass, duly certified by the board of canvassers of each province, city or district in
Metropolitan Manila shall be transmitted to the Speaker of the Batasang Pambansa, who shall, not later
than thirty days after the day of the election, convene the Batasang Pambansa in session and in its
presence open all the certificates of canvass, and the votes shall then be counted.

Section 17 Correction of errors in certificate and supporting statement already transmitted to the
Speaker. - No correction of errors allegedly committed in the certificate of canvass and supporting
statement already transmitted to the Speaker of the Batasang Pambansa shall be allowed, subject to the
provisions of the succeeding section.

Section 18 Preservation of ballot boxes, their keys, and disposition of their contents. - Until after the
completion by the Batasang Pambansa of the canvassing of the votes and until an uncontested
proclamation of the President-elect and Vice-President-elect shall have been obtained, the provincial, city
or district board of canvassers under the joint responsibility with the provincial, city or municipal
treasurers shall provide for the safekeeping and storage of the ballot boxes in a safe and closed chamber
secured by four padlocks: one to be provided by the corresponding board chairman; one by the provincial
or city treasurer concerned; and one each by the ruling party and the accredited dominant opposition
political party.

Section 19 When certificate of canvass is incomplete or bears erasures or alterations. - When the
certificate of canvass, duly certified by the board of canvassers of each province, city or district in
Metropolitan Manila and transmitted to the Speaker of the Batasang Pambansa, as provided in the
Constitution, appears to be incomplete, the Speaker shall require the board of canvassers concerned to
transmit to his office, by personal delivery, the election returns from polling places that were not included
in the certificate of canvass and supporting statements. Said election returns shall be submitted by
personal delivery to the Speaker within two days from receipt of notice. When it appears that any
certificate of canvass or supporting statement of votes by polling place bears erasures or alterations which
may cast doubt as to the veracity of the number of votes stated therein and may affect the result of the
election, the Batasang Pambansa upon request of the Presidential or Vice-Presidential candidate
concerned or his party shall, for the sole purpose of verifying the actual number of votes cast for President
or Vice-President, count the votes as they appear in the copies of the election returns for the Commission.
For this purpose, the Speaker shall require the Commission to deliver its copies of the election returns to
the Batasang Pambansa.

Section 20 Proclamation of the President-elect and Vice-President-elect. - Upon the completion of the
canvass of the votes by the Batasang Pambansa, the persons obtaining the highest number of votes for
President and for Vice-President shall be declared elected; but in case two or more shall have an equal

19
and the highest number of votes, one of them shall be chosen President or Vice-President, as the case may
be, by a majority vote of all the Members of the Batasang Pambansa in session assembled.

In case there are certificates of canvass which have not been submitted to the Speaker of the Batasang
Pambansa on account of missing election returns, a proclamation may be made if the missing certificates
will not affect the results of the election.

In case the certificates of canvass which were not submitted on account of missing election returns will
affect the results of the election, no proclamation shall be made. The Speaker shall immediately instruct
the boards of canvassers concerned to obtain the missing election returns from the boards of election
inspectors or, if the returns have been lost or destroyed upon prior authority from the Commission, to use
any authentic copy of said election returns for the purpose of conducting the canvass, and thereafter issue
the certificates of canvass. The certificates of canvass shall be immediately transmitted to the Speaker of
the Batasang Pambansa.

Proclamation shall be made only upon submission of all certificates of canvass or when the missing
certificates of canvass will not affect the results of the election.

ARTICLE III
ELECTION OF MEMBERS OF THE BATASANG PAMBANSA

Section 21. Regular election of Members of the Batasang Pambansa. - The regular election of the
Members of the Batasang Pambansa shall be held on the second Monday of May, Nineteen hundred and
ninety (1990) and on the same day every six years thereafter.

Section 22 Special election for Members of the Batasang Pambansa. - In case a vacancy arises in the
Batasang Pambansa eighteen months or more before a regular election, the Commission shall call a
special election to be held within sixty days after the vacancy occurs to elect the Member to serve the
unexpired term.

The Batasang Pambansa through a duly approved resolution or an official communication of the Speaker
when it is not in session shall certify to the Commission the existence of said vacancy.

Section 23. Composition of the Batasang Pambansa. - The Batasang Pambansa shall be composed of not
more than two hundred Members elected from the different provinces of the Philippines with their
component cities, highly urbanized cities and districts of Metropolitan Manila, those elected or selected
from various sectors as provided herein, and those chosen by the President from the members of the
Cabinet.

Section 24. Apportionment of representatives. - Until a new apportionment shall have been made, the
Members of the Batasang Pambansa shall be apportioned in accordance with the Ordinance appended to
the Constitution, as follows:

National Capital Region:

Manila, 6;
Quezon City, 4;
Caloocan, 2;
Pasay, 1;
Pasig and Marikina, 2;

20
 Las Pias and Paraaque, 1;
Makati, 1;
Malabon, Navotas and Valenzuela, 2;
San Juan and Mandaluyong, 1;
Taguig, Pateros and Muntinglupa, 1.

Region I:

Abra, 1;
Benguet, 1;
Ilocos Norte with Laoag City, 2;
Ilocos Sur, 2;
La Union, 2;
Mountain Province, 1;
Pangasinan with the cities of Dagupan and San Carlos, 6;
Baguio City, 1.

Region II:

Batanes, 1;
Cagayan, 3;
Ifugao, 1;
Isabela, 3;
Kalinga-Apayao, 1;
Nueva Vizcaya, 1;
Quirino, 1.

Region III:

Bataan, 1;
Bulacan, 4;
Nueva Ecija with the cities of Cabanatuan, Palayan and San Jose, 4;
Pampanga with Angeles City, 4;
Tarlac, 2;
Zambales, 1;
Olongapo City, 1.

Region IV:

Aurora, 1;
Batangas with the cities of Batangas and Lipa, 4;
Cavite with the cities of Cavite, Tagaytay and Trece Martires, 3;
Laguna with San Pablo City, 4;
Marinduque, 1;
Occidental Mindoro, 1;
Oriental Mindoro, 2;
Palawan with Puerto Princesa City, 1;
Quezon with Lucena City, 4;
Rizal, 2;
Romblon, 1.

21
Region V:

Albay with Legaspi City, 3;

Camarines Norte, 1;
Camarines Sur with the cities of Iriga and Naga, 4;
Catanduanes, 1;
Masbate, 2;
Sorsogon, 2.

Region VI:

Aklan, 1;
Antique, 1;
Capiz with Roxas City;
Iloilo with Iloilo City, 5;
Negros Occidental with the cities of Bacolod, Bago, Cadiz, La Carlota, San Carlos and
Silay, 7.

Region VII:

Bohol with Tagbilaran City, 3;

Cebu with the cities of Danao, Lapu-Lapu, Mandaue and Toledo, 6;
Negros Oriental with the cities of Bais, Canlaon and Dumaguete, 3;
Siquijor, 1;
Cebu City, 2.

Region VIII:

Leyte with the cities of Ormoc and Tacloban, 5;

Southern Leyte, 1;
Eastern Samar, 1;
Northern Samar, 1;
Samar with Calbayog City, 2.

Region IX:

Basilan, 1;
Sulu, 1;
Tawi-Tawi, 1;
Zamboanga del Norte with the cities of Dapitan and Dipolog, 2;
Zamboanga del Sur with Pagadian City, 3;
Zamboanga City, 1.

Region X:

Agusan del Norte with Butuan City, 1;

Agusan del Sur, 1;
Bukidnon, 2;
Camiguin, 1;
Misamis Occidental with the cities of Oroquieta, Ozamis and Tangub, 1;

22
 Misamis Oriental with Gingoog City, 2;
Surigao del Norte with Surigao City, 1;
Cagayan de Oro City, 1.

Region XI:

Surigao del Sur, 1;

Davao del Norte, 3;
Davao Oriental, 1;
Davao del Sur, 2;
South Cotabato with General Santos City, 3;
Davao City, 2.

Region XII:

Lanao del Norte, 1;

Lanao del Sur with Marawi City, 2;
Maguindanao with Cotabato City, 2;
North Cotabato, 2;
Sultan Kudarat, 1;
Iligan City, 1.

Any province that may hereafter be created or any component city that may hereafter be declared by or
pursuant to law as a highly urbanized city shall be entitled in the immediately following election to at
least one Member or such number of Members as it may be entitled to on the basis of the number of the
inhabitants and on the same uniform and progressive ratio used in the last preceding apportionment. The
number of Members apportioned to the province out of which the new province was created or where the
new highly urbanized city is geographically located shall be correspondingly adjusted by the
Commission, but such adjustment shall not be made within one hundred twenty days before the election.

Section 25. Voting by province and its component cities, by highly urbanized city or by district in
Metropolitan Manila. - All candidates shall be voted at large by the registered voters of their respective
constituencies. The candidates corresponding to the number of Member or Members to be elected in a
constituency who receive the highest number of votes shall be declared elected.

Section 26. Sectoral representatives. - There shall be three sectors to be represented in the Batasang
Pambansa, namely: (1) youth; (2) agricultural labor; (3) industrial labor whose representatives shall be
elected in the manner herein provided. Each sector shall be entitled to four representatives, two of whom
shall come from Luzon, one from Visayas, and one from Mindanao: Provided, That the youth sector shall
be entitled to two additional sectoral representatives who shall be elected from any part of the country.

Section 27. Scope of the sectors. - The agricultural labor sector covers all persons who personally and
physically till the land as their principal occupation. It includes agricultural tenants and lessees, rural
workers and farm employees, owner-cultivators, settlers and small fishermen.

The industrial labor sector includes all non-agricultural workers and employees.

The youth sector embraces persons not more than twenty-five years of age.

23
Section 28. Selection of sectoral representatives. - Not later than twenty days after the election of
provincial, city or district representatives, the most representative and generally recognized organizations
or aggroupments of members of the agricultural labor, industrial labor, and youth sectors, as attested to by
the Ministers of Agrarian Reform and of Agriculture and Food, the Ministers of Labor and Employment,
and the Ministers of Local Government and of Education, Culture and Sports, respectively, shall, in
accordance with the procedures of said organizations or aggroupments of members of the sector, submit
to the President their respective nominees for each slot allotted for each sector. The President shall
appoint from among the nominees submitted by the aforementioned organizations or aggroupments the
representatives of each sector.

In recognizing the most representative and generally recognized organizations or aggroupments, the
Ministers of Agrarian Reform and of Agriculture and Food, the Minister of Labor and Employment, and
the Ministers of Local Government and Education, Culture and Sports shall consider:

(a) The extent of membership and activity of the organization or aggroupment which should be
national;

(b) The responsiveness of the organization or aggroupment to the legitimate aspirations of its
sector;

(c) The militancy and consistency of the organization or aggroupment in espousing the cause and
promoting the welfare of the sector consistent with that of the whole country;

(d) The observance by such organization or aggroupment of the rule of law; and

(e) Other analogous factors.

The President of the Philippines shall, in writing, notify the Secretary-General of the Batasang Pambansa
of the appointment made by him of any sectoral representative.

Except as herein otherwise provided, sectoral representatives shall have the same functions,
responsibilities, rights, privileges, qualifications and disqualifications as the representatives from the
provinces and their component cities, highly urbanized cities or districts of Metropolitan Manila.

ARTICLE IV
ELECTION OF LOCAL OFFICIALS

Section 29. Regular elections of local officials. - The election of provincial, city and municipal officials
whose positions are provided for by the Local Government Code shall be held throughout the Philippines
in the manner herein prescribed on the first Monday of May, Nineteen hundred and eighty-six and on the
same day every six years thereafter.

The officials elected shall assume office on the thirtieth day of June next following the election and shall
hold office for six years and until their successors shall have been elected and qualified.

All local incumbent officials whose tenure of office shall expire on March 23, 1986 shall hold office until
June 30, 1986 or until their successors shall have been elected and qualified: Provided, That they cannot
be suspended or removed without just cause.

24
Section 30. Component and highly urbanized cities. - Unless their respective charters provide otherwise,
the electorate of component cities shall be entitled to vote in the election for provincial officials of the
province of which it is a part.

The electorate of highly urbanized cities shall not vote in the election for provincial officials of the
province in which it is located: Provided, however, That no component city shall be declared or be
entitled to a highly urbanized city status within ninety days prior to any election.

ARTICLE V
ELECTION OF MEMBERS OF THE REGIONAL ASSEMBLY OF THE AUTONOMOUS
REGIONS.

Section 31. The Sangguniang Pampook of the autonomous regions. - Region IX and Region XII in
southern Philippines shall each have a Sangguniang Pampook to be composed of twenty-seven members
and shall include seventeen representatives elected from the different provinces and cities of each region,
and a sectoral representative each from among the youth, agricultural workers, and non-agricultural
workers (industrial labor) of each region to be selected in the manner herein provided whose
qualifications and disqualifications are the same as Members of the Batasang Pambansa.

The President shall appoint an additional seven representatives in each region whenever in his judgment
any other sector is not properly represented in the Sangguniang Pampook as a result of the elections.

Section 32. Apportionment of members of the Sangguniang Pampook. - The Members of the Sangguniang
Pampook of Region IX and of Region XII shall be apportioned as follows:

Region IX:

Basilan, one (1);

Sulu, three (3);
Tawi-Tawi, one (1);
Zamboanga del Norte including the cities of Dipolog and Dapitan, four, (4);
and Zamboanga del Sur, including the City of Pagadian, six (6);
and Zamboanga City, two (2);

Region XII:

Lanao del Norte, two (2); Iligan City, one (1);

Lanao del Sur including the City of Marawi, four (4);
Maguindanao including the City of Cotabato, four (4);
North Cotabato, four (4);
and Sultan Kudarat, two (2).

Section 33. Election of members of Sangguniang Pampook. - The candidates for the position of seventeen
representatives to the Sangguniang Pampook of Region IX and of Region XII shall be voted at large by
the registered voters of each province including the cities concerned.

The candidates corresponding to the number of member or members to be elected in a constituency who
receive the highest number of votes shall be declared elected.

25
Section 34. Selection of sectoral representatives. - The President shall, within thirty days from the
convening of each Sangguniang Pampook, appoint the sectoral representatives on recommendation of the
Sangguniang Pampook and after due consultation with the representative and generally recognized
organizations or aggrupations of members of the youth, agricultural workers and non-agricultural workers
as attested by the Ministers of Local Government and of Education, Culture and Sports (youth), Ministers
of Agrarian Reform and of Agriculture and Food (agricultural workers), and Ministers of Labor and
Employment (non-agricultural or industrial labor).

The President of the Philippines shall in writing notify the Speaker of the Sangguniang Pampook of each
region of the appointment made by him of any sectoral representative.

The sectoral representatives shall have the same functions, responsibilities, rights, privileges,
qualifications and disqualifications as the elective provincial representatives to the Sangguniang
Pampook: Provided, however, That no defeated candidate for member of the Sangguniang Pampook in
the immediately preceding election shall be appointed as sectoral representative.

Section 35. Filling of vacancy. - Pending an election to fill a vacancy arising from any cause in the
Sangguniang Pampook, the vacancy shall be filled by the President, upon recommendation of the
Sangguniang Pampook: Provided, That the appointee shall come from the same province or sector of the
member being replaced.

Section 36. Term of office. - The present members of the Sangguniang Pampook of each of Region IX
and Region XII shall continue in office until June 30, 1986 or until their successors shall have been
elected and qualified or appointed and qualified in the case of sectoral members. They may not be
removed or replaced except in accordance with the internal rules of said assembly or provisions of
pertinent laws.

The election of members of the Sangguniang Pampook of the two regions shall be held simultaneously
with the local elections of 1986. Those elected in said elections shall have a term of four years starting
June 30, 1986.

Those elected in the election of 1990 to be held simultaneously with the elections of Members of the
Batasang Pambansa shall have a term of six years.

ARTICLE VI
ELECTION OF BARANGAY OFFICIALS

Section 37. Regular election of barangay officials. - The election for barangay officials shall be held
throughout the Philippines in the manner prescribed on the second Monday of May Nineteen hundred and
eighty-eight and on the same day every six years thereafter.

The officials elected shall assume office on the thirtieth day of June next following the election and shall
hold office for six years and until their successors shall have been elected and qualified.

Section 38. Conduct of elections. - The barangay election shall be non-partisan and shall be conducted in
an expeditious and inexpensive manner.

No person who files a certificate of candidacy shall represent or allow himself to be represented as a
candidate of any political party or any other organization; and no political party, political group, political
committee, civic, religious, professional, or other organization or organized group of whatever nature

26
shall intervene in his nomination or in the filing of his certificate of candidacy or give aid or support,
directly or indirectly, material or otherwise favorable to or against his campaign for election: Provided,
That this provision shall not apply to the members of the family of a candidate within the fourth civil
degree of consanguinity or affinity nor to the personal campaign staff of the candidate which shall not be
more than one for every one hundred registered voters in his barangay: Provided, however, That without
prejudice to any liability that may be incurred, no permit to hold a public meeting shall be denied on the
ground that the provisions of this paragraph may or will be violated.

Nothing in this section, however, shall be construed as in any manner affecting or constituting an
impairment of the freedom of individuals to support or oppose any candidate for any barangay office.

Section 39. Certificate of Candidacy. - No person shall be elected punong barangay or kagawad ng
sangguniang barangay unless he files a sworn certificate of candidacy in triplicate on any day from the
commencement of the election period but not later than the day before the beginning of the campaign
period in a form to be prescribed by the Commission. The candidate shall state the barangay office for
which he is a candidate.

The certificate of candidacy shall be filed with the secretary of the sangguniang barangay who shall have
the ministerial duty to receive said certificate of candidacy and to immediately acknowledge receipt
thereof.

In case the secretary refuses to receive the same, or in the case of his absence or non-availability, a
candidate may file his certificate with the election registrar of the city or municipality concerned.

The secretary of the sangguniang barangay or the election registrar, as the case may be, shall prepare a
consolidated list all the candidates and shall post said list in the barangay hall and in other conspicuous
places in the barangay at least ten days before the election.

Any elective or appointive municipal, city, provincial or national official or employee, or those in the
civil or military service, including those in government-owned or controlled corporations, shall be
considered automatically resigned upon the filing of certificate of candidacy for a barangay office.

Section 40. Board of Election Tellers. -

(1) The Commission shall constitute not later than ten days before the election a board of election
tellers in every barangay polling place, to be composed of a public elementary school teacher as
chairman, and two members who are registered voters of the polling place concerned, but who are
not incumbent barangay officials nor related to any candidate for any position in that barangay
within the fourth civil degree of affinity or consanguinity.

In case no public elementary school teachers are available, the Commission shall designate any
registered voter in the polling place who is not an incumbent barangay official nor related to any
candidate for any position in that barangay within the fourth civil degree of affinity or
consanguinity.

(2) The board of election tellers shall supervise and conduct the election in their respective
polling places, count the votes and thereafter prepare a report in triplicate on a form prescribed by
the Commission. The original of this report shall be delivered immediately to the barangay board
of canvassers. The second copy shall be delivered to the election registrar and the third copy shall
be delivered to the secretary of the sangguniang barangay who shall keep the same on file.

27
Section 41. Registration of voters and list of voters. - Not later than seven days before the election, the
board of election tellers shall meet in every barangay polling place to conduct the registration of barangay
voters and to prepare the list of voters. Any voter may challenge the qualification of any person seeking to
register and said challenge shall be heard and decided on the same day by the board of election tellers.

The final list of voters shall be posted in the polling places at least two days before election day. The
registration of any voter shall not be transferred without written notice at least two days before the date of
election. Not later than the day following the barangay election, the board of election tellers shall deliver
the list of voters to the election registrar for custody and safekeeping.

Section 42. Polling places. - (1) The chairman of the board of election tellers shall designate the public
school or any other public building within the barangay to be used as polling place in case the barangay
has one election precinct. (2) For barangays with two or more election precincts the chairman of the board
of canvassers shall designate the public school or any other public building to be used as polling place.

In case there is no public school or other public building that can be used as polling places, other
appropriate private buildings may be designated: Provided, That such buildings are not owned or
occupied or possessed by any incumbent elective public official or candidate, or his relative within the
fourth civil degree of consanguinity or affinity. The polling place shall be centrally located as possible,
always taking into consideration the convenience and safety of the voters.

Section 43. Official barangay ballots. - The official barangay ballots shall be provided by the city or
municipality concerned of a size and color to be prescribed by the Commission.

Such official ballots shall, before they are handed to the voter at the polling place, be authenticated in the
presence of the voter, by the authorized representatives of the candidates and the chairman and members
of the board of election tellers who shall affix their signatures at the back thereof. Any ballot which is not
authenticated shall be deemed spurious.

Section 44. Ballot boxes. - The Commission shall provide the ballot boxes for each barangay polling
place, but each candidate may be permitted to provide a padlock for said ballot box.

Section 45. Postponement or failure of election. - When for any serious cause such as violence, terrorism,
loss or destruction of election paraphernalia or records, force majeure, and other analogous causes of such
nature that the holding of a free, orderly and honest election should become impossible in any barangay,
the Commission, upon a verified petition of an interested party and after due notice and hearing at which
the interested parties are given equal opportunity to be heard, shall postpone the election therein for such
time as it may deem necessary.

If, on account of force majeure, violence, terrorism, fraud or other analogous causes, the election in any
barangay has not been held on the date herein fixed or has been suspended before the hour fixed by law
for the closing of the voting therein and such failure or suspension of election would affect the result of
the election, the Commission, on the basis of a verified petition of an interested party, and after due notice
and hearing, at which the interested parties are given equal opportunity to be heard shall call for the
holding or continuation of the election within thirty days after it shall have verified and found that the
cause or causes for which the election has been postponed or suspended have ceased to exist or upon
petition of at least thirty percent of the registered voters in the barangay concerned.

28
When the conditions in these areas warrant, upon verification by the Commission, or upon petition of at
least thirty percent of the registered voters in the barangay concerned, it shall order the holding of the
barangay election which was postponed or suspended.

Section 46. Barangay board of canvassers. -

(1) The Commission shall constitute a board of canvassers at least seven days before the election
in each barangay, to be composed of the senior public elementary school teacher in the barangay
as chairman, and two other public elementary school teachers, as members.

In case the number of public elementary school teachers is inadequate, the Commission shall
designate the chairman and members of the barangay board of canvassers from among the board
of election tellers.

(2) The barangay board of canvassers shall meet immediately in a building where a polling place
is found and which is most centrally located in the barangay and after canvassing the results from
the various polling places within the barangay, proclaim the winners. The board of canvassers
shall accomplish the certificate of proclamation in triplicate on a form to be prescribed by the
Commission. The original of the certificate shall be sent to the election registrar concerned, the
second copy shall be delivered to the secretary of the sangguniang bayan or sangguniang
panglunsod, as the case may be, and the third copy shall be kept on file by the secretary of the
sangguniang barangay.

(3) In a barangay where there is only one polling place, the barangay board of election tellers
shall also be the barangay board of canvassers.

Section 47. Activities during the campaign period. - During the campaign period, the punong barangay if
he is not a candidate, or any resident of the barangay designated by the Commission, shall convene the
barangay assembly at least once for the purpose of allowing the candidates to appear at a joint meeting
duly called, upon proper and with at least two days notice, to explain to the barangay voters their
respective program of administration, their qualifications, and other information that may help enlighten
voters in casting their votes.

The members of the barangay assembly may take up and discuss other matters relative to the election of
barangay officials.

Section 48. Watchers. - Candidates may appoint two watchers each, to serve alternately, in every polling
place within the barangay, who shall be furnished with a signed copy of the results of the election, in such
form as the Commission may prescribe, immediately after the completion of the canvass.

Section 49. Inclusion and exclusion cases. - Inclusion and exclusion cases which shall be decided not
later than seven before the date of the election shall be within the exclusive original jurisdiction of the
municipal or metropolitan trial court. The notice of such decision shall be served to all parties within
twenty-four hours following its promulgation and any party adversely affected may appeal therefrom
within twenty-four hours to the regional trial court which shall finally decide the same not later than two
days before the date of the election.

Section 50. Funding. - Local governments shall appropriate such funds to defray such necessary and
reasonable expenses of the members of the board of election tellers, board of canvassers and the printing
of election forms and procurement of other election paraphernalia, and the installation of polling booths.

29
Section 51. Penalties. - Violations of any provisions of this Article shall constitute prohibited acts and
shall be prosecuted and penalized in accordance with the provisions of this Code.

ARTICLE VII
THE COMMISSION ON ELECTIONS

Section 52. Powers and functions of the Commission on Elections. - In addition to the powers and
functions conferred upon it by the Constitution, the Commission shall have exclusive charge of the
enforcement and administration of all laws relative to the conduct of elections for the purpose of ensuring
free, orderly and honest elections, and shall:

(a) Exercise direct and immediate supervision and control over national and local officials or
employees, including members of any national or local law enforcement agency and
instrumentality of the government required by law to perform duties relative to the conduct of
elections. In addition, it may authorize CMT cadets eighteen years of age and above to act as its
deputies for the purpose of enforcing its orders.

The Commission may relieve any officer or employee referred to in the preceding paragraph from
the performance of his duties relating to electoral processes who violates the election law or fails
to comply with its instructions, orders, decisions or rulings, and appoint his substitute. Upon
recommendation of the Commission, the corresponding proper authority shall suspend or remove
from office any or all of such officers or employees who may, after due process, be found guilty
of such violation or failure.

(b) During the period of the campaign and ending thirty days thereafter, when in any area of the
country there are persons committing acts of terrorism to influence people to vote for or against
any candidate or political party, the Commission shall have the power to authorize any member or
members of the Armed Forces of the Philippines, the National Bureau of Investigation, the
Integrated National Police or any similar agency or instrumentality of the government, except
civilian home defense forces, to act as deputies for the purpose of ensuring the holding of free,
orderly and honest elections.

(c) Promulgate rules and regulations implementing the provisions of this Code or other laws
which the Commission is required to enforce and administer, and require the payment of legal
fees and collect the same in payment of any business done in the Commission, at rates that it may
provide and fix in its rules and regulations.

Rules and regulations promulgated by the Commission to implement the provisions of this Code
shall take effect on the sixteenth day after publication in the Official Gazette or in at least daily
newspapers of general circulation. Orders and directives issued by the Commission pursuant to
said rules and regulations shall be furnished by personal delivery to accredited political parties
within forty-eight hours of issuance and shall take effect immediately upon receipt.

In case of conflict between rules, regulations, orders or directives of the Commission in the
exercise of its constitutional powers and those issued by any other administrative office or agency
of the government concerning the same matter relative to elections, the former shall prevail.

(d) Summon the parties to a controversy pending before it, issue subpoena and subpoena duces
tecum, and take testimony in any investigation or hearing before it, and delegate such power to
any officer of the Commission who shall be a member of the Philippine Bar. In case of failure of

30
a witness to attend, the Commission, upon proof of service of the subpoena to said witnesses,
may issue a warrant to arrest witness and bring him before the Commission or the officer before
whom his attendance is required.

Any controversy submitted to the Commission shall, after compliance with the requirements of
due process, be immediately heard and decided by it within sixty days from submission thereof.
No decision or resolution shall be rendered by the Commission either en banc or by division
unless taken up in a formal session properly convened for the purpose.

The Commission may, when necessary, avail of the assistance of any national or local law
enforcement agency and/or instrumentality of the government to execute under its direct and
immediate supervision any of its final decisions, orders, instructions or rulings.

(e) Punish contempts provided for in the Rules of Court in the same procedure and with the same
penalties provided therein. Any violation of any final and executory decision, order or ruling of
the Commission shall constitute contempt thereof.

(f) Enforce and execute its decisions, directives, orders and instructions which shall have
precedence over those emanating from any other authority, except the Supreme Court and those
issued in habeas corpus proceedings.

(g) Prescribe the forms to be used in the election, plebiscite or referendum.

(h) Procure any supplies, equipment, materials or services needed for the holding of the election
by public bidding: Provided, That, if it finds the requirements of public bidding impractical to
observe, then by negotiations or sealed bids, and in both cases, the accredited parties shall be duly
notified.

(i) Prescribe the use or adoption of the latest technological and electronic devices, taking into
account the situation prevailing in the area and the funds available for the purpose: Provided, That
the Commission shall notify the authorized representatives of accredited political parties and
candidates in areas affected by the use or adoption of technological and electronic devices not
less than thirty days prior to the effectivity of the use of such devices.

(j) Carry out a continuing and systematic campaign through newspapers of general circulation,
radios and other media forms to educate the public and fully inform the electorate about election
laws, procedures, decisions, and other matters relative to the work and duties of the Commission
and the necessity of clean, free, orderly and honest electoral processes.

(k) Enlist non-partisan group or organizations of citizens from the civic, youth, professional,
educational, business or labor sectors known for their probity, impartiality and integrity with the
membership and capability to undertake a coordinated operation and activity to assist it in the
implementation of the provisions of this Code and the resolutions, orders and instructions of the
Commission for the purpose of ensuring free, orderly and honest elections in any constituency.

Such groups or organizations shall function under the direct and immediate control and
supervision of the Commission and shall perform the following specific functions and duties:

A. Before Election Day:

31
 1. Undertake an information campaign on salient features of this Code and help
in the dissemination of the orders, decisions and resolutions of the Commission
relative to the forthcoming election.

2. Wage a registration drive in their respective areas so that all citizens of voting
age, not otherwise disqualified by law may be registered.

3. Help cleanse the list of voters of illegal registrants, conduct house-to-house

canvass if necessary, and take the appropriate legal steps towards this end.

4. Report to the Commission violations of the provisions of this Code on the

conduct of the political campaign, election propaganda and electoral
expenditures.

B. On Election Day:

1. Exhort all registered voters in their respective areas to go to their polling

places and cast their votes.

2. Nominate one watcher for accreditation in each polling place and each place of
canvass who shall have the same duties, functions and rights as the other
watchers of political parties and candidates. Members or units of any citizen
group or organization so designated by the Commission except its lone duly
accredited watcher, shall not be allowed to enter any polling place except to vote,
and shall, if they so desire, stay in an area at least fifty meters away from the
polling place.

3. Report to the peace authorities and other appropriate agencies all instances of
terrorism, intimidation of voters, and other similar attempts to frustrate the free
and orderly casting of votes.

4. Perform such other functions as may be entrusted to such group or

organization by the Commission.

The designation of any group or organization made in accordance herewith may be revoked by
the Commission upon notice and hearing whenever by its actuations such group or organization
has shown partiality to any political party or candidate, or has performed acts in excess or in
contravention of the functions and duties herein provided and such others which may be granted
by the Commission.

(l) Conduct hearings on controversies pending before it in the cities or provinces upon proper
motion of any party, taking into consideration the materiality and number of witnesses to be
presented, the situation prevailing in the area and the fund available for the purpose.

(m) Fix other reasonable periods for certain pre-election requirements in order that voters shall
not be deprived of their right of suffrage and certain groups of rights granted them in this Code.

32
 Unless indicated in this Code, the Commission is hereby authorized for fix the appropriate period
for the various prohibited acts enumerated herein, consistent with the requirements of free,
orderly, and honest elections.

Section 53. Field offices of the Commission. - The Commission shall have the following field offices:

(1) Regional Election Office, headed by the Regional Election Director and assisted by the
Assistant Regional Director and such other subordinate officers or employees as the Commission
may appoint.

(2) Provincial Election Office, headed by the Provincial Election Supervisor and assisted by such
other subordinate officers or employees as the Commission may appoint.

(3) City/Municipal Election Office, headed by the City/Municipal Registrar who shall be assisted
by an election clerk and such other employees as the Commission may appoint.

The Commission may delegate its powers and functions or order the implementation or enforcement of its
orders, rulings, or decisions through the heads of its field offices.

Section 54. Qualifications. - Only members of the Philippines Bar shall be eligible for appointment to the
position of regional director, assistant regional director, provincial election supervisor and election
registrar: Provided, however, That if there are no members of the Philippine Bar available for
appointment as election registrar, except in cities and capital towns, graduates of duly recognized schools
of law, liberal arts, education or business administration who possess the appropriate civil service
eligibility may be appointed to said position.

Section 55. Office space. - The local government concerned shall provide a suitable place for the office of
the provincial election supervisor and his staff and the election registrar and his staff: Provided, That in
case of failure of the local government concerned to provide such suitable place, the provincial election
supervisor or the election registrar, as the case may be, upon prior authority of the Commission and notice
to the local government concerned, may lease another place for office and the rentals thereof shall be
chargeable to the funds of the local government concerned.

Section 56. Changes in the composition, distribution or assignment of field offices. - The Commission
may make changes in the composition, distribution and assignment of field offices, as well as its
personnel, whenever the exigencies of the service and the interest of free, orderly, and honest election so
require: Provided, That such changes shall be effective and enforceable only for the duration of the
election period concerned and shall not affect the tenure of office of the incumbents of positions affected
and shall not constitute a demotion, either in rank or salary, nor result in change of status: and Provided,
further, That there shall be no changes in the composition, distribution or assignment within thirty days
before election, except for cause and after due notice and hearing, and that in no case shall a regional or
assistant regional director be assigned to a region; a provincial election supervisor to a province; or a city
or municipal election registrar to a city or municipality, where he and/or his spouse are related to any
candidate within the fourth civil degree of consanguinity or affinity as the case may be.

Section 57. Measures to ensure enforcement. - For the effective enforcement of the provisions of this
Code, the Commission is further vested and charged with the following powers, duties and
responsibilities:

33
 1. To issue search warrants after examination under oath or affirmation of the complainant and
the witnesses

2. To stop any illegal election activity, or confiscate, tear down, and stop any unlawful, libelous,
misleading or false election propaganda, after due notice and hearing.

3. To inquire into the financial records of candidates and any organization or group of persons,
motu proprio or upon written representation for probable cause by any candidate or group of

persons or qualified voter, after due notice and hearing.

For purposes of this section, the Commission may avail itself of the assistance of the Commission on
Audit, the Central Bank, the National Bureau of Investigation, the Bureau of Internal Revenue, the Armed
Forces of the Philippines, the Integrated National Police of the Philippines, barangay officials, and other
agencies of the government.

Section 58. Disqualifications of members of the Commission. - The chairman and members of the
Commission shall be subject to the canons of judicial ethics in the discharge of their functions.

No chairman or commissioner shall sit in any case in which he has manifested bias or prejudice for or
against or antagonism against any party thereto and in connection therewith, or in any case in which he
would be disqualified under the Rules of Court. If it be claimed that the chairman or a commissioner is
disqualified as above provided, the party objecting to his competency may file his objection in writing
with the Commission stating the ground therefor. The official concerned shall continue to participate in
the hearing or withdrawn therefrom in accordance with his determination of the question of his
disqualification. The decision shall forthwith be made in writing and filed with the other papers of the
case in accordance with the Rules of Court. If a disqualification should result in a lack of quorum in the
Commission sitting en banc, the Presiding Justice of the Intermediate Appellate Court shall designate a
justice of said court to sit in said case for the purpose of hearing and reaching a decision thereon.

Section 59. Publication of official ballots and election returns and printing thereof. - The Commission
shall publish at least ten days before an election in a newspaper of general circulation certified data on the
number of official ballots and election returns and the names and addresses of the printers and the number
printed by each.

ARTICLE VIII
POLITICAL PARTIES

Section 60. Political party. - "Political party" or "party", when used in this Act, means an organized
group of persons pursuing the same ideology, political ideas or platforms of government and includes its
branches and divisions. To acquire juridical personality, quality it for subsequent accreditation, and to
entitle it to the rights and privileges herein granted to political parties, a political party shall first be duly
registered with the Commission. Any registered political party that, singly or in coalition with others, fails
to obtain at least ten percent of the votes cast in the constituency in which it nominated and supported a
candidate or candidates in the election next following its registration shall, after notice and hearing be
deemed to have forfeited such status as a registered political party in such constituency.

34
Section 61. Registration. - Any organized group of persons seeking registration as a national or regional
political party may file with the Commission a verified petition attaching thereto its constitution and by-
laws, platform or program of government and such other relevant information as may be required by the
Commission. The Commission shall, after due notice and hearing, resolve the petition within ten days
from the date it is submitted for decision.

No religious sect shall be registered as a political party and no political party which seeks to achieve its
goal through violence shall be entitled to accreditation.

Section 62. Publication of petition for registration or accreditation. - The Commission shall require
publication of the petition for registration or accreditation in at least three newspapers of general
circulation and shall, after due notice and hearing, resolve the petition within fifteen days from the date it
is submitted for decision.

ARTICLE IX
ELIGIBILITY OF CANDIDATES AND CERTIFICATE OF CANDIDACY

Section 63. Qualifications for President and Vice-President of the Philippines. - No person may be
elected President unless he is a natural-born citizen of the Philippines, a registered voter, able to read and
write, at least forty years of age on the day of election, and a resident of the Philippines for at least ten
years immediately preceding such election.

Section 64. Qualifications for Members of the Batasang Pambansa. - No person shall be elected Member
of the Batasang Pambansa as provincial, city or district representative unless he is a natural-born citizen
of the Philippines and, on the day of the election, is at least twenty-five years of age, able to read and
write, a registered voter in the constituency in which he shall be elected, and a resident thereof for a
period of not less than six months immediately preceding the day of the election.

A sectoral representative shall be a natural-born citizen of the Philippines, able to read and write, a
resident of the Philippines, able to read and write, a resident of the Philippines for a period of not less than
one year immediately preceding the day of the election, a bona fide member of the sector he seeks to
represent, and in the case of a representative of the agricultural or industrial labor sector, shall be a
registered voter, and on the day of the election is at least twenty-five years of age.

The youth sectoral representative should at least be eighteen and not be more than twenty-five years of
age on the day of the election: Provided, however, That any youth sectoral representative who attains the
age of twenty-five years during his term shall be entitled to continue in office until the expiration of his
term.

Section 65. Qualifications of elective local officials. - The qualifications for elective provincial, city,
municipal and barangay officials shall be those provided for in the Local Government Code.

Section 66. Candidates holding appointive office or positions. - Any person holding a public appointive
office or position, including active members of the Armed Forces of the Philippines, and officers and
employees in government-owned or controlled corporations, shall be considered ipso facto resigned from
his office upon the filing of his certificate of candidacy.

Section 67. Candidates holding elective office. - Any elective official, whether national or local, running
for any office other than the one which he is holding in a permanent capacity, except for President and

35
Vice-President, shall be considered ipso facto resigned from his office upon the filing of his certificate of
candidacy.

Section 68. Disqualifications. - Any candidate who, in an action or protest in which he is a party is
declared by final decision of a competent court guilty of, or found by the Commission of having (a) given
money or other material consideration to influence, induce or corrupt the voters or public officials
performing electoral functions; (b) committed acts of terrorism to enhance his candidacy; (c) spent in his
election campaign an amount in excess of that allowed by this Code; (d) solicited, received or made any
contribution prohibited under Sections 89, 95, 96, 97 and 104; or (e) violated any of Sections 80, 83, 85,
86 and 261, paragraphs d, e, k, v, and cc, subparagraph 6, shall be disqualified from continuing as a
candidate, or if he has been elected, from holding the office. Any person who is a permanent resident of
or an immigrant to a foreign country shall not be qualified to run for any elective office under this Code,
unless said person has waived his status as permanent resident or immigrant of a foreign country in
accordance with the residence requirement provided for in the election laws.

Section 69. Nuisance candidates. - The Commission may motu proprio or upon a verified petition of an
interested party, refuse to give due course to or cancel a certificate of candidacy if it is shown that said
certificate has been filed to put the election process in mockery or disrepute or to cause confusion among
the voters by the similarity of the names of the registered candidates or by other circumstances or acts
which clearly demonstrate that the candidate has no bona fide intention to run for the office for which the
certificate of candidacy has been filed and thus prevent a faithful determination of the true will of the
electorate.

Section 70. Guest candidacy. - A political party may nominate and/or support candidates not belonging to
it.

Section 72. Effects of disqualification cases and priority. - The Commission and the courts shall give

priority to cases of disqualification by reason of violation of this Act to the end that a final decision shall
be rendered not later than seven days before the election in which the disqualification is sought.

Any candidate who has been declared by final judgment to be disqualified shall not be voted for, and the
votes cast for him shall not be counted. Nevertheless, if for any reason, a candidate is not declared by
final judgment before an election to be disqualified and he is voted for and receives the winning number
of votes in such election, his violation of the provisions of the preceding sections shall not prevent his
proclamation and assumption to office.

Section 73. Certificate of candidacy. - No person shall be eligible for any elective public office unless he
files a sworn certificate of candidacy within the period fixed herein.

A person who has filed a certificate of candidacy may, prior to the election, withdraw the same by
submitting to the office concerned a written declaration under oath.

No person shall be eligible for more than one office to be filled in the same election, and if he files his
certificate of candidacy for more than one office, he shall not be eligible for any of them.

However, before the expiration of the period for the filing of certificates of candidacy, the person who
was filed more than one certificate of candidacy may declare under oath the office for which he desires to
be eligible and cancel the certificate of candidacy for the other office or offices.

36
The filing or withdrawal of a certificate of candidacy shall not affect whatever civil, criminal or
administrative liabilities which a candidate may have incurred.

Section 74. Contents of certificate of candidacy. - The certificate of candidacy shall state that the person
filing it is announcing his candidacy for the office stated therein and that he is eligible for said office; if
for Member of the Batasang Pambansa, the province, including its component cities, highly urbanized
city or district or sector which he seeks to represent; the political party to which he belongs; civil status;
his date of birth; residence; his post office address for all election purposes; his profession or occupation;
that he will support and defend the Constitution of the Philippines and will maintain true faith and
allegiance thereto; that he will obey the laws, legal orders, and decrees promulgated by the duly
constituted authorities; that he is not a permanent resident or immigrant to a foreign country; that the
obligation imposed by his oath is assumed voluntarily, without mental reservation or purpose of evasion;
and that the facts stated in the certificate of candidacy are true to the best of his knowledge.

Unless a candidate has officially changed his name through a court approved proceeding, a certificate
shall use in a certificate of candidacy the name by which he has been baptized, or if has not been baptized
in any church or religion, the name registered in the office of the local civil registrar or any other name
allowed under the provisions of existing law or, in the case of a Muslim, his Hadji name after performing
the prescribed religious pilgrimage: Provided, That when there are two or more candidates for an office
with the same name and surname, each candidate, upon being made aware or such fact, shall state his
paternal and maternal surname, except the incumbent who may continue to use the name and surname
stated in his certificate of candidacy when he was elected. He may also include one nickname or stage
name by which he is generally or popularly known in the locality.

The person filing a certificate of candidacy shall also affix his latest photograph, passport size; a
statement in duplicate containing his bio-data and program of government not exceeding one hundred
words, if he so desires.

Section 75. Filing and distribution of certificate of candidacy. - The certificate of candidacy shall be filed
on any day from the commencement of the election period but not later than the day before the beginning
of the campaign period: Provided, That in cases of postponement or failure of election under Sections 5
and 6 hereof, no additional certificate of candidacy shall be accepted except in cases of substitution of
candidates as provided under Section 77 hereof.

The certificates of candidacy for President and Vice-President of the Philippines shall be filed in ten
legible copies with the Commission which shall order the printing of copies thereof for distribution to all
polling places. The certificates of candidacy for the other offices shall be filed in duplicate with the
offices herein below mentioned, together with a number of clearly legible copies equal to twice the
number of polling places in the province, city, district, municipality or barangay, as the case may be:

(a) For representative in the Batasang Pambansa, with the Commission, the provincial election
supervisor, city election registrar in case of highly urbanized cities, or an officer designated by
the Commission having jurisdiction over the province, city or representative district who shall
send copies thereof to all polling places in the province, city or district;

(b) For provincial offices, with the provincial election supervisor of the province concerned who
shall send copies thereof to all polling places in the province;

(c) For city and municipal offices, with the city or municipal election registrar who shall send
copies thereof to all polling places in the city or municipality; and

37
 (d) For punong barangay or kagawad ng sangguniang barangay, the certificates of candidacy shall
be filed in accordance with the provisions of Section 39 of Article VI of this Code.

The duly authorized receiving officer shall immediately send the original copy of all certificates of
candidacy received by him to the Commission.

Section 76. Ministerial duty of receiving and acknowledging receipt. - The Commission, provincial
election supervisor, election registrar or officer designated by the Commission or the board of election
inspectors under the succeeding section shall have the ministerial duty to receive and acknowledge receipt
of the certificate of candidacy.

Section 77. Candidates in case of death, disqualification or withdrawal of another. - If after the last day
for the filing of certificates of candidacy, an official candidate of a registered or accredited political party
dies, withdraws or is disqualified for any cause, only a person belonging to, and certified by, the same
political party may file a certificate of candidacy to replace the candidate who died, withdrew or was
disqualified. The substitute candidate nominated by the political party concerned may file his certificate
of candidacy for the office affected in accordance with the preceding sections not later than mid-day of
the day of the election. If the death, withdrawal or disqualification should occur between the day before
the election and mid-day of election day, said certificate may be filed with any board of election
inspectors in the political subdivision where he is a candidate, or, in the case of candidates to be voted for
by the entire electorate of the country, with the Commission.

Section 78. Petition to deny due course to or cancel a certificate of candidacy. - A verified petition
seeking to deny due course or to cancel a certificate of candidacy may be filed by the person exclusively
on the ground that any material representation contained therein as required under Section 74 hereof is
false. The petition may be filed at any time not later than twenty-five days from the time of the filing of
the certificate of candidacy and shall be decided, after due notice and hearing, not later than fifteen days
before the election.

ARTICLE X
CAMPAIGN AND ELECTION PROPAGANDA

Section 79. Definitions. - As used in this Code:

(a) The term "candidate" refers to any person aspiring for or seeking an elective public office,
who has filed a certificate of candidacy by himself or through an accredited political party,
aggroupment, or coalition of parties;

(b) The term "election campaign" or "partisan political activity" refers to an act designed to
promote the election or defeat of a particular candidate or candidates to a public office which
shall include:

(1) Forming organizations, associations, clubs, committees or other groups of persons for the
purpose of soliciting votes and/or undertaking any campaign for or against a candidate;

(2) Holding political caucuses, conferences, meetings, rallies, parades, or other similar
assemblies, for the purpose of soliciting votes and/or undertaking any campaign or propaganda
for or against a candidate;

38
 (3) Making speeches, announcements or commentaries, or holding interviews for or against the
election of any candidate for public office;

(4) Publishing or distributing campaign literature or materials designed to support or oppose the
election of any candidate; or

(5) Directly or indirectly soliciting votes, pledges or support for or against a candidate.

The foregoing enumerated acts if performed for the purpose of enhancing the chances of aspirants for
nomination for candidacy to a public office by a political party, aggroupment, or coalition of parties shall
not be considered as election campaign or partisan election activity.

Public expressions or opinions or discussions of probable issues in a forthcoming election or on attributes

of or criticisms against probable candidates proposed to be nominated in a forthcoming political party
convention shall not be construed as part of any election campaign or partisan political activity
contemplated under this Article.

Section 80. Election campaign or partisan political activity outside campaign period. - It shall be
unlawful for any person, whether or not a voter or candidate, or for any party, or association of persons, to
engage in an election campaign or partisan political activity except during the campaign period: Provided,
That political parties may hold political conventions or meetings to nominate their official candidates
within thirty days before the commencement of the campaign period and forty-five days for Presidential
and Vice-Presidential election.

Section 81. Intervention of foreigners. - It shall be unlawful for any foreigner, whether judicial or natural
person, to aid any candidate or political party, directly or indirectly, or take part in or influence in any
manner any election, or to contribute or make any expenditure in connection with any election campaign
or partisan political activity.

Section 82. Lawful election propaganda. - Lawful election propaganda shall include:

(a) Pamphlets, leaflets, cards, decals, stickers or other written or printed materials of a size not
more than eight and one-half inches in width and fourteen inches in length;

(b) Handwritten or printed letters urging voters to vote for or against any particular candidate;

(c) Cloth, paper or cardboard posters, whether framed or posted, with an area exceeding two feet
by three feet, except that, at the site and on the occasion of a public meeting or rally, or in
announcing the holding of said meeting or rally, streamers not exceeding three feet by eight feet
in size, shall be allowed: Provided, That said streamers may not be displayed except one week
before the date of the meeting or rally and that it shall be removed within seventy-two hours after
said meeting or rally; or

(d) All other forms of election propaganda not prohibited by this Code as the Commission may
authorize after due notice to all interested parties and hearing where all the interested parties were
given an equal opportunity to be heard: Provided, That the Commission's authorization shall be
published in two newspapers of general circulation throughout the nation for at least twice within
one week after the authorization has been granted.

39
Section 83. Removal, destruction or defacement of lawful election propaganda prohibited. - It shall be
unlawful for any person during the campaign period to remove, destroy, obliterate, or in any manner
deface or tamper with, or prevent the distribution of lawful election propaganda.

Section 84. Requirements for published or printed election propaganda. - Any newspaper, newsletter,
newsweekly, gazette or magazine advertising, posters, pamphlets, circulars, handbills, bumper stickers,
streamers, simple list of candidates or any published or printed political matter for or against a candidate
or group of candidates to any public office shall bear and be identified by the words "paid for by"
followed by the true and correct name and address of the payor and by the words "printed by" followed
by the true and correct name and address of the printer.

Section 85. Prohibited forms of election propaganda. - It shall be unlawful:

(a) To print, publish, post or distribute any poster, pamphlet, circular, handbill, or printed matter
urging voters to vote for or against any candidate unless they bear the names and addresses of the
printer and payor as required in Section 84 hereof;

(b) To erect, put up, make use of, attach, float or display any billboard, tinplate-poster, balloons
and the like, of whatever size, shape, form or kind, advertising for or against any candidate or
political party;

(c) To purchase, manufacture, request, distribute or accept electoral propaganda gadgets, such as
pens, lighters, fans of whatever nature, flashlights, athletic goods or materials, wallets, shirts,
hats, bandanas, matches, cigarettes and the like, except that campaign supporters accompanying a
candidate shall be allowed to wear hats and/or shirts or T-shirts advertising a candidate;

(d) To show or display publicly any advertisement or propaganda for or against any candidate by
means of cinematography, audio-visual units or other screen projections except telecasts which
may be allowed as hereinafter provided; and

(e) For any radio broadcasting or television station to sell or give free of charge air time for
campaign and other political purposes except as authorized in this Code under the rules and
regulations promulgated by the Commission pursuant thereto.

Any prohibited election propaganda gadget or advertisement shall be stopped, confiscated or torn
down by the representative of the Commission upon specific authority of the Commission.

Section 86. Regulation of election propaganda through mass media. -

(a) The Commission shall promulgate rules and regulations regarding the sale of air time for
partisan political purposes during the campaign period to insure the equal time as to duration and
quality in available to all candidates for the same office or political parties at the same rates or
given free of charge; that such rates are reasonable and not higher than those charged other buyers
or users of air time for non-political purposes; that the provisions of this Code regarding the
limitation of expenditures by candidates and political parties and contributions by private persons,
entities and institutions are effectively enforced; and to ensure that said radio broadcasting and
television stations shall not unduly allow the scheduling of any program or permit any sponsor to
manifestly favor or oppose any candidate or political party by unduly or repeatedly referring to or
including said candidate and/or political party in such program respecting, however, in all

40
 instances the right of said stations to broadcast accounts of significant or newsworthy events and
views on matters of public interest.

(b) All contracts for advertising in any newspaper, magazine, periodical or any form of
publication promoting or opposing the candidacy of any person for public office shall, before its
implementation, be registered by said newspaper, magazine, periodical or publication with the
Commission. In every case, it shall be signed by the candidate concerned or by the duly
authorized representative of the political party.

(c) No franchise or permit to operate a radio or television station shall be granted or issued,
suspended or cancelled during the election period.

Any radio or television stations, including that owned or controlled by the Government, shall give free of
charge equal time and prominence to an accredited political party or its candidates if it gives free of
charge air time to an accredited political party or its candidates for political purposes.

In all instances, the Commission shall supervise the use and employment of press, radio and television
facilities so as to give candidates equal opportunities under equal circumstances to make known their
qualifications and their stand on public issues within the limits set forth in this Code on election spending.

Rules and regulations promulgated by the Commission under and by authority of this section shall take
effect on the seventh day after their publication in at least two daily newspapers of general circulation.
Prior to the effectivity of said rules and regulations, no political advertisement or propaganda for or
against any candidate or political party shall be published or broadcast through the mass media.

Violation of the rules and regulations of the Commission issued to implement this section shall be an
election offense punishable under Section 264 hereof.

Section 87. Rallies, meetings and other political activities. - Subject to the requirements of local
ordinances on the issuance of permits, any political party supporting official candidates or any candidate
individually or jointly with other aspirants may hold peaceful political rallies, meetings, and other similar
activities during the campaign period: Provided, That all applications for permits to hold meetings, rallies
and other similar political activities, receipt of which must be acknowledged in writing and which
application shall be immediately posted in a conspicuous place in the city or municipal building, shall be
acted upon in writing by local authorities concerned within three days after the filing thereof and any
application not acted upon within said period shall be deemed approved: and Provided, further, That
denial of any application for said permit shall be appealable to the provincial election supervisor or to the
Commission whose decision shall be made within forty-eight hours and which shall be final and
executory: Provided, finally, That one only justifiable ground for denial is a prior written application by
any candidate or political party for the same purpose has been approved.

Section 88. Public rally. - Any political party or candidate shall notify the election registrar concerned of
any public rally said political party or candidate intends to organize and hold in the city or municipality,
and within seven working days thereafter submit to the election registrar a statement of expenses incurred
in connection therewith.

Section 89. Transportation, food and drinks. - It shall be unlawful for any candidate, political party,
organization, or any person to give or accept, free of charge, directly or indirectly, transportation, food or
drinks or things of value during the five hours before and after a public meeting, on the day preceding the

41
election, and on the day of the election; or to give or contribute, directly or indirectly, money or things of
value for such purpose.

Section 90. Comelec space. - The Commission shall procure space in at least one newspaper of general
circulation in every province or city: Provided, however, That in the absence of said newspaper,
publication shall be done in any other magazine or periodical in said province or city, which shall be
known as "Comelec Space" wherein candidates can announce their candidacy. Said space shall be
allocated, free of charge, equally and impartially by the Commission among all candidates within the area
in which the newspaper is circulated.

Section 91. Comelec poster area. - Whenever practicable, the Commission shall also designate and
provide for a common poster are in strategic places in each town wherein candidates can announce and
further their candidacy through posters, said space to be likewise allocated free of charge, equally and
impartially by the Commission among all the candidates concerned.

Section 92. Comelec time. - The Commission shall procure radio and television time to be known as
"Comelec Time" which shall be allocated equally and impartially among the candidates within the area of
coverage of all radio and television stations. For this purpose, the franchise of all radio broadcasting and
television station are hereby amended so as to provide radio television time, free of charge, during the
period of the campaign.

Section 93. Comelec information bulletin. - The Commission shall cause the printing, and supervise the
dissemination of bulletins to be known as "Comelec Bulletin" which shall be of such size as to adequately
contain the picture, bio-data and program of government of every candidate. Said bulletin shall be
disseminated to the voters or displayed in such places as to give due prominence thereto. Any candidate
may reprint at his expense, any "Comelec Bulletin" upon prior authority of the Commission: Provided,
That the printing of the names of the different candidates with their bio-data must be in alphabetical order
irrespective of party affiliation.

ARTICLE XI
ELECTORAL CONTRIBUTIONS AND EXPENDITURES

Section 94. Definitions. - As used in this Article:

(a) The term "contribution" includes a gift, donation, subscription, loan, advance or deposit of
money or anything of value, or a contract, promise or agreement to contribute, whether or not
legally enforceable, made for the purpose of influencing the results of the elections but shall not
include services rendered without compensation by individuals volunteering a portion or all of
their time in behalf of a candidate or political party. It shall also include the use of facilities
voluntarily donated by other persons, the money value of which can be assessed based on the
rates prevailing in the area.

(b) The term "expenditure" includes the payment or delivery of money of anything of value, or a
contract, promise or agreement to make an expenditure, for the purpose of influencing the results
of the election. It shall also include the use of facilities personally owned by the candidate, the
money value of the use of which can be assessed based on the rates prevailing in the area.

42
 (c) The term "person" includes an individual, partnership, committee, association, corporation,
and any other organization or group of persons.

Section 95. Prohibited contributions. - No contribution for purposes of partisan political activity shall be
made directly or indirectly by any of the following:

(a) Public or private financial institutions: Provided, however, That nothing herein shall prevent
the making of any loan to a candidate or political party by any such public or private financial
institutions legally in the business of lending money, and that the loan is made in accordance with
laws and regulations and in the ordinary course of business;

(b) Natural and juridical persons operating a public utility or in possession of or exploiting any
natural resources of the nation;

(c) Natural and juridical persons who hold contracts or sub-contracts to supply the government or
any of its divisions, subdivisions or instrumentalities, with goods or services or to perform
construction or other works;

(d) Natural and juridical persons who have been granted franchises, incentives, exemptions,
allocations or similar privileges or concessions by the government or any of its divisions,
subdivisions or instrumentalities, including government-owned or controlled corporations;

(e) Natural and juridical persons who, within one year prior to the date of the election, have been
granted loans or other accommodations in excess of P100,000 by the government or any of its
divisions, subdivisions or instrumentalities including government-owned or controlled
corporations;

(f) Educational institutions which have received grants of public funds amounting to no less than
P100,000.00;

(g) Officials or employees in the Civil Service, or members of the Armed Forces of the
Philippines; and

(h) Foreigners and foreign corporations.

It shall be unlawful for any person to solicit or receive any contribution from any of the persons
or entities enumerated herein.

Section 96. Soliciting or receiving contributions from foreign sources. - It shall be unlawful for any
person, including a political party or public or private entity to solicit or receive, directly or indirectly, any
aid or contribution of whatever form or nature from any foreign national, government or entity for the
purposes of influencing the results of the election.

Section 97. Prohibited raising of funds. - It shall be unlawful for any person to hold dances, lotteries,
cockfights, games, boxing bouts, bingo, beauty contests, entertainments, or cinematographic, theatrical or
other performances for the purpose of raising funds for an election campaign or for the support of any
candidate from the commencement of the election period up to and including election day; or for any
person or organization, whether civic or religious, directly or indirectly, to solicit and/or accept from any
candidate for public office, or from his campaign manager, agent or representative, or any person acting

43
in their behalf, any gift, food, transportation, contribution or donation in cash or in kind from the
commencement of the election period up to and including election day; Provided, That normal and
customary religious stipends, tithes, or collections on Sundays and/or other designated collection days,
are excluded from this prohibition.

Section 98. True name of contributor required. - No person shall make any contribution in any name
except his own nor shall any candidate or treasurer of a political party receive a contribution or enter or
record the same in any name other than that of the person by whom it was actually made.

Section 99. Report of contributions. - Every person giving contributions to any candidate, treasurer of the
party, or authorized representative of such candidate or treasurer shall, not later than thirty days after the
day of the election, file with the Commission a report under oath stating the amount of each contribution,
the name of the candidate, agent of the candidate or political party receiving the contribution, and the date
of the contribution.

Section 100. Limitations upon expenses of candidates. - No candidate shall spend for his election
campaign an aggregate amount exceeding one peso and fifty centavos for every voter currently registered
in the constituency where he filed his candidacy: Provided, That the expenses herein referred to shall
include those incurred or caused to be incurred by the candidate, whether in cash or in kind, including the
use, rental or hire of land, water or aircraft, equipment, facilities, apparatus and paraphernalia used in the
campaign: Provided, further, That where the land, water or aircraft, equipment, facilities, apparatus and
paraphernalia used is owned by the candidate, his contributor or supporter, the Commission is hereby
empowered to assess the amount commensurate with the expenses for the use thereof, based on the
prevailing rates in the locality and shall be included in the total expenses incurred by the candidate.

Section 101. Limitations upon expenses of political parties. - A duly accredited political party may spend
for the election of its candidates in the constituency or constituencies where it has official candidates an
aggregate amount not exceeding the equivalent of one peso and fifty centavos for every voter currently
registered therein. Expenses incurred by branches, chapters, or committees of such political party shall be
included in the computation of the total expenditures of the political party.

Expenses incurred by other political parties shall be considered as expenses of their respective individual
candidates and subject to limitation under Section 100 of this Code.

Section 102. Lawful expenditures. - To carry out the objectives of the preceding sections, no candidate or
treasurer of a political party shall, directly or indirectly, make any expenditure except for the following
purposes:

(a) For travelling expenses of the candidates and campaign personnel in the course of the
campaign and for personal expenses incident thereto;

(b) For compensation of campaigners, clerks, stenographers, messengers, and other persons
actually employed in the campaign;

(c) For telegraph and telephone tolls, postage, freight and express delivery charges;

(d) For stationery, printing and distribution of printed matters relative to candidacy;

(e) For employment of watchers at the polls;

44
 (f) For rent, maintenance and furnishing of campaign headquarters, office or place of meetings;

(g) For political meetings and rallies and the use of sound systems, lights and decorations during
said meetings and rallies;

(h) For newspaper, radio, television and other public advertisements;

(i) For employment of counsel, the cost of which shall not be taken into account in determining
the amount of expenses which a candidate or political party may have incurred under Section 100
and 101 hereof;

(j) For copying and classifying list of voters, investigating and challenging the right to vote of
persons registered in the lists the costs of which shall not be taken into account in determining the
amount of expenses which a candidate or political party may have incurred under Sections 100
and 101 hereof; or

(k) For printing sample ballots in such color, size and maximum number as may be authorized by
the Commission and the cost of such printing shall not be taken into account in determining the
amount of expenses which a candidate or political party may have incurred under Sections 100
and 101 hereof.

Section 103. Persons authorized to incur election expenditures. - No person, except the candidate, the
treasurer of a political party or any person authorized by such candidate or treasurer, shall make any
expenditure in support of or in opposition to any candidate or political party. Expenditures duly
authorized by the candidate or the treasurer of the party shall be considered as expenditures of such
candidate or political party.

The authority to incur expenditures shall be in writing, copy of which shall be furnished the Commission
signed by the candidate or the treasurer of the party and showing the expenditures so authorized, and shall
state the full name and exact address of the person so designated.

Section 104. Prohibited donations by candidates, treasurers of parties or their agents. - No candidate, his
or her spouse or any relative within the second civil degree of consanguinity or affinity, or his campaign
manager, agent or representative shall during the campaign period, on the day before and on the day of
the election, directly or indirectly, make any donation, contribution or gift in cash or in kind, or undertake
or contribute to the construction or repair of roads, bridges, school buses, puericulture centers, medical
clinics and hospitals, churches or chapels cement pavements, or any structure for public use or for the use
of any religious or civic organization: Provided, That normal and customary religious dues or
contributions, such as religious stipends, tithes or collections on Sundays or other designated collection
days, as well as periodic payments for legitimate scholarships established and school contributions
habitually made before the prohibited period, are excluded from the prohibition.

The same prohibition applies to treasurers, agents or representatives of any political party.

Section 105. Accounting by agents of candidate or treasurer. - Every person receiving contributions or
incurring expenditures by authority of the candidate or treasurer of the party shall, on demand by the
candidate or treasurer of the party and in any event within five days after receiving such contribution or
incurring such expenditure, render to the candidate or the treasurer of the party concerned, a detailed
account thereof with proper vouchers or official receipts.

45
Section 106. Records of contributions and expenditures. -

(a) It shall be the duty of every candidate, treasurer of the political party and person acting under
the authority of such candidate or treasurer to issue a receipt for every contribution received and
to obtain and keep a receipt stating the particulars of every expenditure made.

(b) Every candidate and treasurer of the party shall keep detailed, full, and accurate records of all
contributions received and expenditures incurred by him and by those acting under his authority,
setting forth therein all information required to be reported.

(c) Every candidate and treasurer of the party shall be responsible for the preservation of the
records of contributions and expenditures, together with all pertinent documents, for at least three
years after the holding of the election to which they pertain and for their production for inspection
by the Commission or its duly authorized representative, or upon presentation of a subpoena
duces tecum duly issued by the Commission. Failure of the candidate or treasurer to preserve
such records or documents shall be deemed prima facie evidence of violation of the provisions of
this Article.

Section 107. Statement of contributions and expenditures. - Every candidate and treasurer of the political
party shall, not later than seven days, or earlier than ten days before the day of the election, file in
duplicate with the office indicated in the following section, full, true and itemized, statement of all
contributions and expenditures in connection with the election.

Within thirty days after the day of the election, said candidate and treasurer shall also file in duplicate a
supplemental statement of all contribution and expenditures not included in the statement filed prior to the
day of the election.

Section 108. Place for filing statements. - The statements of contributions and expenditures shall be filed
as follows:

(a) Those of candidates for President and Vice-President, with the Commission.

(b) Those of candidates for Members of the Batasang Pambansa, with the provincial election
supervisor concerned, except those of candidates in the National Capital Region which shall be
filed with the regional election director of said region.

(c) Those of candidates for provincial offices, with the provincial election supervisor concerned.

(d) Those of candidates for city, municipal and barangay offices, with the election registrar
concerned.

If the statement is sent by mail, it shall be by registered mail, and the date on which it was registered with
the post office may be considered as the filing date thereof if confirmed on the same date by telegram or
radiogram addressed to the office or official with whom the statement should be filed.

The provincial election supervisors and election registrars concerned shall, within fifteen days after the
last day for the filing of the statements, send to the Commission duplicate copies of all statements filed
with them.

46
Section 109. Form and contents of statement. - The statement shall be in writing, subscribed and sworn to
by the candidate or by the treasurer of the party, shall be complete as of the date next preceding the date
of filing and shall set forth in detail (a) the amount of contribution, the date of receipt, and the full name
and exact address of the person from whom the contribution was received; (b) the amount of every
expenditure, the date thereof, the full name and exact address of the person to whom payment was made,
and the purpose of the expenditure; (c) any unpaid obligation, its nature and amount, and to whom said
obligation is owing; and (d) such other particulars which the Commission may require.

If the candidate or treasurer of the party has received no contribution, made no expenditure, or has no
pending obligation, the statement shall reflect such fact.

Section 110. Preservation and inspection of statements. - All statements of contributions and
expenditures shall be kept and preserved at the office where they are filed and shall constitute part of the
public records thereof for three years after the election to which they pertain. They shall not be removed
therefrom except upon order of the Commission or of a competent court and shall, during regular office
hours, be subject and open to inspection by the public. The officer in-charge thereof, shall, on demand,
furnish certified copies of any statement upon payment of the fee prescribed under Section 270 hereof.

It shall be the duty of the Commission to examine all statements of contributions and expenditures of
candidates and political parties to determine compliance with the provisions of this Article.

Section 111. Effect of failure to file statement. - In addition to other sanctions provided in this Code, no
person elected to any public office shall enter upon the duties of his office until he has filed the statement
of contributions and expenditures herein required.

The same prohibition shall apply if the political party which nominated the winning candidate fails to file
the statements required herein within the period prescribed by this Code.

Section 112. Report of contractor and business firms. - Every person or firm to whom any electoral
expenditure is made shall, within thirty days after the day of the election, file with the Commission a
report setting forth the full names and exact addresses of the candidates, treasurers of political parties, and
other persons incurring such expenditures, the nature or purpose of each expenditure, the date and costs
thereof, and such other particulars as the Commission may require. The report shall be signed and sworn
to by the supplier or contractor, or in case of a business firm or association, by its president or general
manager.

It shall be the duty of such person or firm to whom an electoral expenditure is made to require every agent
of a candidate or of the treasurer of a political party to present written authority to incur electoral
expenditures in behalf of such candidate or treasurer, and to keep and preserve at its place of business,
subject to inspection by the Commission or its authorized representatives, copies of such written
authority, contracts, vouchers, invoices and other records and documents relative to said expenditures for
a period of three years after the date of the election to which they pertain.

It shall be unlawful for any supplier, contractor or business firm to enter into contract involving election
expenditures with representatives of candidates or political parties without such written authority.

ARTICLE XII
REGISTRATION OF VOTERS

47
Section 113. Permanent List of Voters. - Any provision of Presidential Decree No. 1896 to the contrary
notwithstanding, the list of voters prepared and used in the election of Members of the Batasang
Pambansa on May 14, 1984, with such additions, cancellations and corrections as may hereafter be made
in accordance with the provisions of this Code, shall constitute the permanent list of voters in each city or
municipality, as the case may be, until 1996.

For purposes of the next following election, the Commission, through the election registrars, shall assign
the proper precincts and polling places to the registered voters in said list. Written notice of any such
change shall be made to the affected voters within two weeks therefrom.

Section 114. Renewal of the Permanent List. - The list of voters prepared in accordance with the
preceding section shall be renewed in nineteen hundred and ninety-six and every twelve years thereafter.

Section 115. Necessity of Registration. - In order that a qualified elector may vote in any election,
plebiscite or referendum, he must be registered in the permanent list of voters for the city or municipality
in which he resides.

Section 116. Who may be registered in the list. - All persons having complied with the requisites herein
prescribed for the registration of voters shall be registered in the list, provided they possess all the
qualifications and none of the disqualifications of a voter. Those who failed to register in the election of
1984, for any reason whatsoever, may register in accordance with the provisions of this Code. Any person
who may not have on the date of registration the age or period of residence required may also be
registered upon proof that on the date of the election, plebiscite or referendum he shall have such
qualifications.

Section 117. Qualifications of a voter. - Every citizen of the Philippines, not otherwise disqualified by
law, eighteen years of age or over, who shall have resided in the Philippines for one year and in the city or
municipality wherein he proposes to vote for at least six months immediately preceding the election, may
be registered as a voter.

Any person who transfers residence to another city, municipality or country solely by reason of his
occupation; profession; employment in private or public service; educational activities; work in military
or naval reservations; service in the army, navy or air force; the constabulary or national police force; or
confinement or detention in government institutions in accordance with law, shall be deemed not to have
lost his original residence.

Section 118. Disqualifications. - The following shall be disqualified from voting:

(a) Any person who has been sentenced by final judgment to suffer imprisonment for not less
than one year, such disability not having been removed by plenary pardon or granted amnesty:
Provided, however, That any person disqualified to vote under this paragraph shall automatically
reacquire the right to vote upon expiration of five years after service of sentence.

(b) Any person who has been adjudged by final judgment by competent court or tribunal of
having committed any crime involving disloyalty to the duly constituted government such as
rebellion, sedition, violation of the anti-subversion and firearms laws, or any crime against
national security, unless restored to his full civil and political rights in accordance with law:
Provided, That he shall regain his right to vote automatically upon expiration of five years after
service of sentence.

48
 (c) Insane or incompetent persons as declared by competent authority.

Section 119. Preparation of the permanent list of voters. - For the preparation of the permanent list of
voters in nineteen hundred and ninety-six and every twelve years thereafter, the board of election
inspectors referred to in Article XIV hereof of each election precinct shall hold four meetings on the
seventh Saturday, seventh Sunday, sixth Saturday and sixth Sunday preceding the date of the regular
election to be held. At these meetings the board shall prepare eight copies of the list of voters of the
precinct wherein it shall register the electors applying for registration.

Section 120. Preparation of the list before other regular elections. - For the preparation of the list before
other regular elections, the board of election inspectors of each election precinct shall meet in the polling
place on the seventh and sixth Saturdays before the day of the election. At these meetings, the board shall
prepare and certify eight copies of the list of voters of the corresponding precinct transferring thereto the
names of the voters appearing in the list used in the preceding election and including therein such new
qualified voters as may apply for registration, as provided in Section 126 hereof.

Section 121. Preparation of the list before any special election, plebiscite or referendum. - For the
preparation of the list of voters before a special election, plebiscite or referendum, the board of elections
inspectors of each election precinct shall hold a meeting in the polling place on the second Saturday
following the day of the proclamation calling such election. At this meeting the board shall transfer the
names of the voters appearing in the list used in the preceding election and enter those of the newly
registered voters.

Section 122. Transfer of names of voters from the permanent list to the current one. - The transfer of the
names of the voters of the precinct already registered in the list used in the preceding election to the list to
be made as provided for in the two preceding sections is a ministerial duty of the board, and any omission
or error in copying shall be corrected motu proprio, or upon petition of the interested party, without delay
and in no case beyond three days from the time such error is noticed; and if the board should refuse, the
interested party may apply for such correction to the proper municipal or metropolitan trial court which
shall decide the case without delay and in no case beyond three days from the date the petition is filed.
The decision of the proper municipal or metropolitan trial court shall be final and unappealable in
whatever form or manner.

To facilitate the transfer of names of voters, the election registrar shall deliver the book of voters to the
board of election inspectors on the day before the registration of voters, to be returned after the last day of
registration.

Section 123. Cancellation and exclusion in the transfer of names. - In transferring the names of the voters
of the precinct from the list used in the preceding election to the current list, the board shall exclude those
who have applied for the cancellation of their registration, those who have died, those who did not vote in
the immediately preceding two successive regular elections, those who have been excluded by court
orders issued in accordance with the provisions of this Code, and those who have been disqualified, upon
motion of any member of the board or of any elector or watcher, upon satisfactory proof to the board and
upon summons to the voter in cases of disqualification. The motion shall be decided by the board without
delay and in no case beyond three days from its filing. Should the board deny the motion, or fail to act
thereon within the period herein fixed, the interested party may apply for such exclusion to the municipal
or metropolitan trial court which shall decide the petition without delay and in no case beyond three days
from the date the petition is filed. The decision of the court shall be final. The poll clerk shall keep a
record of these exclusions and shall furnish three copies thereof to the election registrar who shall, in turn

49
keep one copy and send the two other copies thereof to the provincial election supervisor and the
Commission, to be attached by them to the permanent list under their custody.

Section 124. Meeting to close the list of voters. - The board of election inspectors shall also meet on the
second Saturday immediately preceding the day of the regular election, or on the second day immediately
preceding the day of the special election, plebiscite or referendum whether it be Sunday or a legal
holiday, for the purpose of making such inclusions, exclusions, and corrections as may be or may have
been ordered by the courts, stating opposite every name so corrected, added, or cancelled, the date of the
order and the court which issued the same; and for the consecutive numbering of the voters of the election
precinct.

Should the board fail to include in the list of voters any person ordered by competent court to be so
included, said person shall, upon presentation of a certified copy of the order of inclusion and upon proper
identification, be allowed by the board to vote.

Should the board fail to exclude from the list of voters any person ordered by the court to be so excluded,
the board shall not permit said person to vote upon presentation to it by any interested party of a certified
copy of the order of exclusion.

Section 125. Re-registration. - A voter who is registered in the permanent list of voters need not register
anew for subsequent elections unless he transfer residence to another city or municipality, or his
registration has been cancelled on the ground of disqualification and such disqualification has been lifted
or removed. Likewise a voter whose registration has been cancelled due to failure to vote in the preceding
regular election may register anew in the city or municipality where he is qualified to vote.

Section 126. Registration of voters. - On the seventh and sixth Saturdays before a regular election or on
the second Saturday following the day of the proclamation calling for a new special election, plebiscite or
referendum, any person desiring to be registered as a voter shall accomplish in triplicate before the board
of election inspectors a voter's affidavit in which shall be stated the following data:

(a) Name, surname, middle name, maternal surname;

(b) Date and place of birth;

(c) Citizenship;

(d) Periods of residence in the Philippines and in the place of registration;

(e) Exact address with the name of the street and house number or in case there is none, a brief
description of the locality and the place;

(f) A statement that the applicant has not been previously registered, otherwise he shall be
required to attach a sworn application for cancellation of his previous registration; and

(g) Such other information or data which may be required by the Commission.

The voter's affidavit shall also contain three specimens of the applicant's signature and clear and

50
legible prints of his left and right hand thumbmarks and shall be sworn to and filed together with four
copies of the latest identification photograph to be supplied by the applicant.

The oath of the applicant shall include a statement that he does not have any of the disqualifications of a
voter and that he has not been previously registered in the precinct or in any other precinct.

Before the applicant accomplishes his voter's affidavit, the board of election inspectors shall appraise the
applicant of the qualifications and disqualifications prescribed by law for a voter. It shall also see to it that
the accomplished voter's affidavit contain all the data therein required and that the applicant's specimen
signatures, the prints of his left and right hand thumbmarks and his photograph are properly affixed in
each of the voter's affidavit.

Section 127. Illiterate or disabled applicants. - The voter's affidavit of an illiterate or physically disabled
person may be prepared by any relative within the fourth civil degree of consanguinity of affinity or by
any member of the board of election inspectors who shall prepare the affidavit in accordance with the data
supplied by the applicant.

Section 128. Voter's identification. - The identification card issued to the voter shall serve and be
considered as a document for the identification of each registered voter: Provided, however, That if the
voter's identity is challenged on election day and he cannot present his voter identification card, his
identity may be established by the specimen signatures, the photograph or the fingerprints in his voter's
affidavit in the book of voters. No extra or duplicate copy of the voter identification card shall be
prepared and issued except upon authority of the Commission.

Each identification card shall bear the name and the address of the voter, his date of birth, sex, civil status,
occupation, his photograph, thumbmark, the city or municipality and number of the polling place where
he is registered, his signature, his voter serial number and the signature of the chairman of the board of
election inspectors.

Any voter previously registered under the provisions of Presidential Decree Numbered 1896 who desires
to secure a voter identification card shall, on any registration day, provide four copies of his latest
identification photograph to the board of election inspectors which upon receipt thereof shall affix one
copy thereof to the voter's affidavit in the book of voters, one copy to the voter identification card to be
issued to the voter and transmit through the election registrar, one copy each to the provincial election
supervisor and the Commission to be respectively attached to the voter's affidavit in their respective
custody.

Section 129. Action by the board of election inspectors. - Upon receipt of the voter's affidavit, the board
of election inspectors shall examine the data therein. If it finds that the applicant possesses all the
qualifications and none of the disqualifications of a voter, he shall be registered. Otherwise, he shall not
be registered.

The name and address of each registered voter shall, immediately upon his registration, be entered in the
proper alphabetical group in the list after which the voter identification card shall be issued to the voter.

Section 130. Provincial central file of registered voters. - There shall be a provincial central file of
registered voters containing the duplicate copies of all approved voter's affidavits in each city and
municipality in the province which shall be under the custody and supervision of the provincial election
supervisor. The applications shall be compiled alphabetically by precincts so as to make the file an exact
replica of the book of voters in the possession of the election registrar.

51
Should the book of voters in the custody of the election registrar be lost or destroyed at a time so close to
the election day that there is no time to reconstitute the same, the corresponding book of voters in the
provincial file shall be used during the voting.

Section 131. National central file of registered voters. - There shall also be a national central file or
registered voters consisting of the triplicate copies of all approved voters' affidavits in all cities and
municipalities which shall be prepared and kept in the central office of the Commission. The applications
in the national central file shall be compiled alphabetically according to the surnames of the registered
voters regardless of the place of registration.

Section 132. Preservation of voter's affidavits. - A copy of the affidavit of each voter shall be kept by the
board of election inspectors until after the election when it shall deliver the same to the election registrar
together with the copies of the list of voters and other election papers for use in the next election. The
election registrar shall compile the voter's affidavits by precinct alphabetically in a book of voters. The
other two copies shall be sent by the board of election inspectors on the day following the date of the
affidavit to the office of the provincial election supervisor and the Commission in Manila. The provincial
election supervisor and the Commission shall respectively file and preserve the voter's affidavits by city
and municipality and in alphabetical order of their surnames. The fourth copy shall be given to the voter
as evidence of his registration.

Section 133. Columns in the list of voters. - The list of voters shall be arranged in columns as follows: In
the first column there shall be entered, at the time of closing of the list before the election, a number
opposite the name of each voter registered, beginning with number one and continuing in consecutive
order until the end of the list. In the second column, the surnames of the registered voters shall be written
in alphabetical order followed by their respective first names, without abbreviations of any kind. In the
third column, the respective residences of such persons with the name of the street and number, or, in case
there be none, a brief description of the locality or place. In the fourth column, shall be entered the
periods of residence in the Philippines and in the city or municipality. In the fifth column, there shall be
entered on the day of the election the numbers of the ballots which were given successively to each voter.
In the sixth column, the voter shall stamp on the day of the election the mark of the thumb of his right
hand and under said mark his signature. And in the seventh column, the signature of the chairman of the
board of election inspectors who has handed the ballot to the voter. It will be sufficient that the fifth,
sixth, and seventh columns shall be filled in the copy of the list under the custody of the board of election
inspectors which shall see to it that the thumbmark is stamped plainly.

Section 134. Certificate of the board of election inspectors in the list of voters. - Upon the adjournment of
each meeting for the registration of voters, the board of election inspectors shall close each alphabetical
group of surnames of voters by writing the dates on the next line in blank, which shall be forthwith signed
by each member, and, before adding a new name on the same page at the next meeting, it shall write the
following: "Added at the _ _ _ meeting" specifying if it is the second third or fourth meeting of the board,
as the case may be. If the meeting adjourned is the last one for the registration of voters, the board shall,
besides closing each alphabetical group of voters as above provided, add at the end of the list a certificate
(a) of the corrections and cancellations made in the permanent list, specifying them, or that there has been
none, and (b) of the total number of voters registered in the precinct.

Section 135. Publication of the list. - At the first hour of the working day following the last day of
registration of voters, the poll clerk shall deliver to the election registrar a copy of the list certified to by
the board of election inspectors as provided in the preceding section; another copy, also certified, shall be
sent to the provincial election supervisor of the province, and another, likewise certified, shall be sent to
the Commission, in whose offices said copies shall be open to public inspection during regular office

52
hours. On the same day and hour, the poll clerk shall also post a copy of the list in the polling place in a
secure place on the door or near the same at a height of a meter and a half, where it may be conveniently
consulted by the interested parties. The chairman, poll clerk and the two members of the board of election
inspectors shall each keep a copy of the list which may be inspected by the public in their residence or
office during regular office hours. Immediately after the meeting for the closing of the list, the poll clerk
shall also send a notice to the election registrar, provincial election supervisor and the Commission
regarding the changes and the numbering above referred to, to be attached to the copy of the list under
their custody.

Section 136. Challenge of right to register. - Any person applying for registration may be challenged
before the board of election inspectors on any registration day be any member, voter, candidate, or
watcher. The board shall then examine the challenged person and shall receive such other evidence as it
may deem pertinent, after which it shall decide whether the elector shall be included in or excluded from
the list as may be proper. All challenges shall be heard and decided without delay, and in no case beyond
three days from the date the challenge was made.

After the question has been decided, the board of election inspectors shall give to each party a brief
certified statement setting forth the challenge and the decision thereon.

Section 137. Power of the board of election inspectors to administer oaths and issue summons. - For the
purpose of determining the right of applicants to be registered as voters in the list, the board of election
inspectors shall have the same power to administer oaths, to issue subpoena and subpoena duces tecum
and to compel witnesses to appear and testify, but the latter's fees and expenses

incident to the process shall be paid in advance by the party in whose behalf the summons is issued.

Section 138. Jurisdiction in inclusion and exclusion cases. - The municipal and metropolitan trial courts
shall have original and exclusive jurisdiction over all matters of inclusion and exclusion of voters from
the list in their respective municipalities or cities. Decisions of the municipal or metropolitan trial courts
may be appealed directly by the aggrieved party to the proper regional trial court within five days from
receipt of notice thereof, otherwise said decision of the municipal or metropolitan trial court shall become
final and executory after said period. The regional trial court shall decide the appeal within ten days from
the time the appeal was received and its decision shall be immediately final and executory. No motion for
reconsideration shall be entertained by the courts.

Section 139. Petition for inclusion of voters in the list. - Any person whose application for registration
has been disapproved by the board of election inspectors or whose name has been stricken out from the
list may apply, within twenty days after the last registration day, to the proper municipal or metropolitan
trial court, for an order directing the board of election inspectors to include or reinstate his name in the
list, together with the certificate of the board of election inspectors regarding his case and proof of service
of notice of his petition upon a member of the board of election inspectors with indication of the time,
place, and court before which the petition is to be heard.

Section 140. Voters excluded through inadvertence or registered with an erroneous or misspelled name.
- Any voter registered in the permanent list who has not been included in the list prepared for the election
or who has been included therein with a wrong or misspelled name shall have the right to file an
application on any date with the proper municipal or metropolitan trial court, for an order directing that
his name be reinstated in the list or that he be registered with his correct name. He shall attach to such
application a certified copy of the entry of his name in the list of the preceding election, together with

53
proof that he has applied without success to the board of election inspectors and that he has served notice
thereof upon a member of the board.

Section 141. Change of name of registered voter. - Any previously registered voter whose name has been
changed by reason of marriage or by virtue of a court order may request the board of election inspectors
during any of its meetings held under this Article that his registration in the list be recorded under his or
her new name.

Section 142. Petition for exclusion of voters from the list. - Any registered voter in a city or municipality
may apply at any time except during the period beginning with the twenty-first day after the last
registration day of any election up to and including election day with the proper municipal or
metropolitan trial court, for the exclusion of a voter from the list, giving the name and residence of the
latter, the precinct in which he is registered, and the grounds for the challenge. The petition shall be sworn
to and accompanied by proof of notice to the board of election inspectors concerned, if the same is duly
constituted, and to the challenged voters.

Section 143. Common rules governing judicial proceedings in the matter of inclusion, exclusion, and
correction of names of voters. -

(a) Outside of regular office hours no petition for inclusion, exclusion, or correction of names of
voters shall be received.

(b) Notices to the members of the board of election inspectors and to challenged voters shall state
the place, day and hour in which such petition shall be heard, and such notice may be made by
sending a copy thereof by registered mail or by personal delivery or by leaving it in the
possession of a person of sufficient discretion in the residence of the said person or, in the event
that the foregoing procedure is not practicable, by posting a copy in a conspicuous place in the
city hall or municipal building and in two other conspicuous places within the city or
municipality, at least ten days prior to the day set for the hearing.

In the interest of justice and to afford the challenged voter every opportunity to contest the
petition for exclusion, the court concerned may, when the challenged voter fails to appear in the
first day set for the hearing, order that notice be effected in such manner and within such period
of time as it may decide, which time shall in no case be more than ten days from the day the
respondent is first found in default.

(c) Each petition shall refer to only one precinct.

(d) No costs shall be assessed in these proceedings. However, if the court should be satisfied that
the application has been filed for the sole purpose of molesting the adverse party and causing him
to incur expenses, it may condemn the culpable party to pay the costs and incidental expenses.

(e) Any candidate who may be affected by the proceedings may intervene and present his
evidence.

(f) The decision shall be based on the evidence presented. If the question is whether or not the
voter is real or fictitious, his non-appearance on the day set for hearing shall be prima facie
evidence that the registered voter is fictitious. In no case shall a decision be rendered upon a
stipulation of facts.

54
 (g) These applications shall be heard and decided without delay. The decision shall be rendered
within six hours after the hearing and within ten days from the date of its filing in court. Cases
appealed to the regional trial court shall be decided within ten days from receipt of the appeal in
the office of the clerk of court. In any case, the court shall decide these petitions not later than the
day before the election and the decision rendered thereon shall be immediately final and
executory, notwithstanding the provisions of Section 138 on the finality of decisions.

Section 144. Canvass to check registration. - The election registrar shall, once every two years or more
often should the Commission deem it necessary in order to preserve the integrity of the permanent lists of
voters, conduct verification by mail or house-to-house canvass, or both, of the registered voters of any
barangay for purposes of exclusion proceedings.

Section 145. Annulment of permanent lists of voters. - Any book of voters not prepared in accordance
with the provisions of this Code or the preparation of which has been effected with fraud, bribery,
forgery, impersonation, intimidation, force, or any other similar irregularity or which list is statistically
improbable may, upon verified petition of any voter or election registrar, or duly registered political party,
and after notice and hearing, be annulled by the Commission: Provided, That no order, ruling or decision
annulling a book of voters shall be executed within sixty days before an election.

Section 146. Reconstitution of lost or destroyed registration records. - The Commission shall reconstitute
all registration records which have been lost or destroyed. For this purpose, it shall be the duty of the
election registrar to immediately report to the Commission any case of loss or destruction of approved
applications for registration in their custody. Such reconstitution shall be made with the use of the
corresponding copies in the national or provincial central files of registered voters: Provided, That if this
is not feasible, the registered voter concerned may be summoned by the election registrar to effect such
reconstitution by accomplishing a new application. Reconstituted forms shall be clearly marked with the
word "reconstituted".

The reconstitution of any lost or destroyed application for registration shall not affect the criminal liability
of any person or persons who may be responsible for such loss or destruction.

Section 147. Examination of registration records. - All registration records in the possession of the city
or municipal election registrar, the provincial election supervisor, and the Commission shall, during
regular office hours, be open to examination by the public with legitimate inquiries for purposes of
election.

Law enforcement agencies shall, upon prior authorization by the Commission, have access to said
registration records should the same be necessary to, or in aid of, their investigative functions and duties,
subject to regulations promulgated by the Commission.

Section 148. List of voters. - Fifteen days before the date of the regular election or special election,
referendum or plebiscite, the board of election inspectors must post the final list of voters in each precinct
with each and every page thereof duly signed or subscribed and sworn to by the members of the board of
election inspectors and that failure to comply with this provision will constitute an election offense.

Any candidate or authorized representative of an accredited political party, upon formal request made to
an election registrar, shall be entitled to a certified copy of the most recent list of voters in any precinct,
municipality, city or province, upon payment of a reasonable fee as may be prescribed by the
Commission.

55
 ARTICLE XIII
PRECINCTS AND POLLING PLACES

Section 149. Precincts and their establishment. - The unit of territory for the purpose of voting is the
election precinct, and every barangay as of the approval of this Act shall have at least one such precinct.

The Commission shall establish all election precincts.

The precincts actually established in the preceding regular election shall be maintained, but the
Commission may introduce such adjustments, changes or new divisions or abolish them, if necessary:
Provided, however, That the territory comprising an election precinct shall not be altered or a new
precinct established within forty-five days before a regular election and thirty days before a special
election or a referendum or plebiscite.

Section 150. Arrangements of election precincts. -

(a) Each election precinct shall have, as far as possible not more than three hundred voters and
shall comprise, as far as practicable, contiguous and compact territory.

(b) When it appears that an election precinct contains more than three hundred voters, the
Commission shall, in the interest of orderly election, and in order to facilitate the casting of votes,
be authorized to divide a precinct not later than one week after the last day of registration of
voters. But the polling place of all the precincts created thereby shall be located in the same
building or compound where the polling place of the original precinct is located, and if this be not
feasible, in a place as close as possible to the polling place of the original precinct: Provided,
however, That the polling place of the new precinct may be located elsewhere upon written
petition of the majority of the voters of the new precinct: Provided, further, That when a precinct
is divided into two or more precincts, the registered voters shall be included in the precinct
wherein they reside. Every case of alteration of a precinct shall be duly published by posting a
notice of any change in conspicuous location in the precinct, and in the municipal building or city
hall, as the case may be.

(c) A municipality which has been merged with another municipality shall constitute at least one
election precinct, if the distance between the remotest barangay of the merged municipality and
the nearest polling place in the municipality to which it has been merged shall, by the shortest
road, exceed five kilometers.

(d) An island or group of islands having one hundred and fifty or more voters shall constitute a
precinct.

(e) Any alteration of the election precincts or the establishment of new ones shall be
communicated to the provincial election supervisor, the provincial superintendent of schools, etc.
together with the corresponding maps, which shall be published as prescribed in the next
succeeding sections.

Section 151. Publication of maps or precincts. - At least five days before the first registration day
preceding a regular election or special election or a referendum or a plebiscite, the Commission shall,
through its duly authorized representative, post in the city hall or municipal building and in three other
conspicuous places in the city or municipality and on the door of each polling place, a map of the city or

56
municipality showing its division into precincts with their respective boundaries and indicating therein all
streets and alleys in populous areas and the location of each polling place.

These maps shall be kept posted until after the election, referendum or plebiscite.

Section 152. Polling place. - A polling place is the building or place where the board of election
inspectors conducts its proceedings and where the voters shall cast their votes.

Section 153. Designation of polling places. - The location of polling places designated in the preceding
regular election shall continue with such changes as the Commission may find necessary, after notice to
registered political parties and candidates in the political unit affected, if any, and hearing: Provided, That
no location shall be changed within forty-five days before a regular election and thirty days before a
special election or a referendum or plebiscite, except in case it is destroyed or it cannot be used.

Section 154. Requirements for polling places. - Each polling place shall be, as far as practicable, a ground
floor and shall be of sufficient size to admit and comfortably accommodate forty voters at one time
outside the guard rail for the board of election inspectors. The polling place shall be located within the
territory of the precinct as centrally as possible with respect to the residence of the voters therein and
whenever possible, such location shall be along a public road. No designation of polling places shall be
changed except upon written petition of the majority of the voters of the precinct or agreement of all the
political parties or by resolution of the Commission upon prior notice and hearing.

A public building having the requirements prescribed in the preceding paragraph shall be preferred as
polling place.

Section 155. Building that shall not be used as polling places. - No polling place shall be located in a
public or private building owned, leased, or occupied by any candidate or of any person who is related to
any candidate within the fourth civil degree of consanguinity or affinity, or any officer of the government
or leader of any political party, group or faction, nor in any building or surrounding premises under the
actual control of a private entity, political party or religious organization. In places where no suitable
public building is available, private school buildings may be used as polling places. No polling place shall
be located within the perimeter of or inside a military or police camp or reservation or within a prison
compound.

Any registered voter, candidate or political party may petition the Commission not later than thirty days
before the first registration day for the transfer of the polling place from the prohibited buildings provided
herein. Such petition shall be heard and decided by the Commission within twenty days from the filing of
the petition. Failure to effect the transfer of the polling place after the Commission found it to be located
in violation of this section within the period prescribed herein shall be a ground for the postponement of
the election in the polling place concerned.

Section 156. Signs and flags of polling places. - On the day of the voting as well as on any day that the
board of election inspectors might meet, every polling place shall have in front a sign showing the number
of the precinct to which it belongs and the Philippine flag shall be hoisted at the proper height.

Section 157. Arrangement and contents of polling places. - Each polling place shall conform as much as
possible to the sketch on the following page.

Section 158. Voting booth. - During the voting, there shall be in each polling place a booth for every
twenty voters registered in the precinct. Each booth shall be open on the side fronting the table for the

57
board of election inspectors and its three sides shall be closed with walls at least seventy centimeters wide
and two meters high. The upper part shall be covered, if necessary, to preserve the secrecy of the ballot.
Each booth shall have in the background a shelf so placed that voters can write therein while standing and
shall be kept clearly lighted, by artificial lights, if necessary, during the voting.

The Commission shall post inside each voting booth and elsewhere in the polling place on the day before
the election, referendum and plebiscite a list containing the names of all the candidates or the issues or
questions to be voted for, and shall at all times during the voting period keep such list posted in said
places.

Section 159. Guard rails. -

(a) In every polling place there shall be a guard rail between the voting booths and the table for
the board of election inspectors which shall have separate entrance and exit. The booths shall be
so arranged that they can be accessible only by passing through the guard rail and by entering
through its open side facing the table of the board of election inspectors.

(b) There shall also be a guard rail for the watchers between the place reserved for them and the
table for the board of election inspectors and at a distance of not more than fifty centimeters from
the latter so that the watchers may see and read clearly during the counting of the contents of the
ballots and see and count the votes recorded by the board of election inspectors member on the
corresponding tally sheets.

(c) There shall also be, if possible, guard rails separating the table of the board of election
inspectors from the voters waiting for their turn to cast their votes, with entrance and exit to give
them orderly access to the table and the booths during the voting.

(d) The polling place shall be so arranged that the booths, the table, the ballot boxes and the
whole polling place, except what is being written within the booths, shall be in plain view of the
board of election inspectors, the watchers and other persons who may be within the polling place.

Section 160. Ballot boxes. -

(a) There shall be in each polling place on the day of the voting a ballot box one side of which
shall be transparent which shall be set in a manner visible to the voting public containing two
compartments, namely, the compartment for valid ballots which is indicated by an interior cover
painted white and the compartment for spoiled ballots which is indicated by an interior cover
painted red. The boxes shall be uniform throughout the Philippines and shall be solidly
constructed and shall be closed with three different locks as well as three numbered security locks
and such other safety devices as the Commission may prescribe in such a way that they can not be
opened except by means of three distinct keys and by destroying such safety devices.

(b) In case of the destruction or disappearance of any ballot box on election day, the board of
election inspectors shall immediately report it to the city or municipal treasurer who shall furnish
another box or receptacle as equally adequate as possible. The election registrar shall report the
incident and the delivery of a new ballot box by the fastest means of communication on the same
day to the Commission and to the provincial election supervisor.

Section 161. Tally boards. - At the beginning of the counting, there shall be placed within the plain view
of the board of election inspectors, watchers and the public, a tally board where the names of all the

58
registered candidates or the issues or questions to be voted upon shall be written, and the poll clerk shall
record thereon the votes received by each of them as the chairman of the board of election inspectors
reads the ballot.

Section 162. Furnishing of ballot boxes, forms, stationeries and materials for election. - The Commission
shall prepare and furnish the ballot boxes, forms, stationeries and materials necessary for the registration
of voters and the holding of the election.

The provincial, city and municipal treasurer shall have custody of such election paraphernalia, supplies
and materials as are entrusted to him under the law or rules of the Commission and shall be responsible
for their preservation and storage, and for any loss, destruction, impairment or damage of any election
equipment, material or document in their possession furnished under this Code.

Section 163. Inspection of polling places. - Before the day of the election, referendum or plebiscite, the
Chairman of the Commission shall, through its authorized representatives, see to it that all polling places
are inspected and such omissions and defects as may be found corrected. The Commission shall keep the
reports on these inspections.

ARTICLE XIV
BOARD OF ELECTION INSPECTORS

Section 164. Composition and appointment of board of election inspectors. - At least thirty days before
the date when the voters list is to be prepare in accordance with this Code, in the case of a regular election
or fifteen days before a special election, the Commission shall, directly or through its duly authorized
representatives, constitute a board of election inspectors for each precinct to be composed of a chairman
and a poll clerk who must be public school teachers, priority to be given to civil service eligibles, and two
members, each representing the two accredited political parties. The appointment shall state the precinct
to which they are assigned and the date of the appointment.

Section 165. Oath of the members of the board of election inspectors. - The members of the board of
election inspectors, whether permanent, substitute or temporary, shall before assuming their office, take
and sign an oath upon forms prepared by the Commission, before an officer authorized to administer
oaths or, in his absence, before any other member of the board of election inspectors present, or in case no
one is present, they shall take it before any voter. The oaths shall be sent immediately to the city or
municipal treasurer.

Section 166. Qualification of members of the board of election inspectors. - No person shall be appointed
chairman, member or substitute member of the board of election inspectors unless he is of good moral
character and irreproachable reputation, a registered voter of the city or municipality, has never been
convicted of any election offense or of any other crime punishable by more than six months of
imprisonment, or if he has pending against him an information for any election offense. He must be able
to speak and write English or the local dialect.

Section 167. Disqualification. - No person shall serve as chairman or member of the board of election
inspectors if he is related within the fourth civil degree of consanguinity or affinity to any member of the
board of election inspectors or to any candidate to be voted for in the polling place or his spouse.

59
Section 168. Powers of the board of election inspectors. - The board of election inspectors shall have the
following powers and functions:

a. Conduct the voting and counting of votes in their respective polling places;

b. Act as deputies of the Commission in the supervision and control of the election in the polling
places wherein they are assigned, to assure the holding of the same in a free, orderly and honest
manner; and

c. Perform such other functions prescribed by this Code or by the rules and regulations
promulgated by the Commission.

Section 169. Voting privilege of members of board of election inspectors. - Members of the board of
election inspectors and their substitutes may vote in the polling place where they are assigned on election
day: Provided, That they are registered voters within the province, city or municipality where they are
assigned: and Provided, finally, That their voting in the polling places where they are not registered voters
be noted in the minutes of the board of election inspectors.

Section 170. Relief and substitution of members of the board of election inspectors. - Public school
teachers who are members of the board of election inspectors shall not be relieved nor disqualified from
acting as such members, except for cause and after due hearing.

Any member of the board of election inspectors, nominated by a political party, as well as his substitute
may at any time be relieved from office and substituted with another having the legal qualifications upon
petition of the authorized representative of the party upon whose nomination the appointment was made,
and it shall be unlawful to prevent said person from, or disturb him in, the performance of the duties of
the said office. A record of each case of substitution shall be made, setting forth therein the hour in which
the replaced member has ceased in the office and the status of the work of the board of election
inspectors. Said record shall be signed by each member of the board of election inspectors including the
incoming and outgoing officers.

Section 171. Vacancy in the board of election inspectors. - Every vacancy in the board of election
inspectors shall be filled for the remaining period in the manner hereinbefore prescribed.

Section 172. Proceedings of the board of election inspectors. - The meetings of the board of election
inspectors shall be public and shall be held only in the polling place authorized by the Commission.

The board of election inspectors shall have full authority to maintain order within the polling place and its
premises, to keep access thereto open and unobstructed, and to enforce obedience to its lawful orders. If
any person shall refuse to obey lawful orders of the board of election inspectors, or shall conduct himself
in a disorderly manner in its presence or within its hearing and thereby interrupt or disturb its
proceedings, the board of election inspectors may issue an order in writing directing any peace officer to
take such person into custody until the adjournment of the meeting, but such order shall not be executed
as to prevent any person so taken into custody from exercising his right to vote. Such order shall be
executed by any peace officer to whom it may be delivered, but if none be present, by any other person
deputized by the board of election inspectors in writing.

Section 173. Prohibition of political activity. - No member of the board of election inspectors shall
engage in any partisan political activity or take part in the election except to discharge his duties as such
and to vote.

60
Section 174. Functioning of the board of election inspectors. - The board of election inspectors shall act
through its chairman, and shall decide without delay by majority vote all questions which may arise in the
performance of its duties.

Section 175. Temporary vacancies. - If, at the time of the meeting of the board of election inspectors, any
member is absent, or the office is still vacant, the members present shall call upon the substitute or the
absent members to perform the duties of the latter; and, in case such substitute cannot be found, the
members present shall appoint any non-partisan registered voter of the polling place to temporarily fill
said vacancy until the absent member appears or the vacancy is filled. In case there are two or more
members present, they shall act jointly: Provided, That if the absent member is one who has been
proposed by an accredited political party, the representative of said political party or in his absence the
watchers belonging to said party shall designate a registered voter of the polling place to temporarily fill
said vacancy: Provided, further, That in the event or refusal or failure of either representative or watchers
of said political party to make the designation, the members of the board of election inspectors present
shall choose a non-partisan registered voter of the polling place to fill the vacancy.

Section 176. Temporary designation of members of the board of election inspectors by watchers. - If at
the time the board of election inspectors must meet, all the positions in the board of election inspectors
are vacant, or if not one of the appointed members shall appear, the watchers present may designate
voters of the polling place to act in the place of said members until the absentees shall appear or the
vacancies are filled.

Section 177. Arrest of absent members. - The member or members of the board of election inspectors
present may order the arrest of any other member or substitute thereof, who in their judgment, has
absented himself with intention of obstructing the performance of duties of the board of election
inspectors.

ARTICLE XV
WATCHERS

Section 178. Official watchers of candidates. - Every registered political party, coalition of political
parties and every independent candidate shall each be entitled to one watcher in every polling place.

No person shall be appointed watcher unless he is a qualified voter of the city or municipality, of good
reputation and shall not have been convicted by final judgment of any election offense or of any other
crime, must know how to read and write Pilipino, English, Spanish or any of the prevailing local dialects,
and not related within the fourth civil degree of consanguinity or affinity to the chairman or any member
of the board of election inspectors in the polling place where he seeks appointment as a watcher.

Each candidate, political party or coalition of political parties shall designate in every province, highly
urbanized city or district in the Metropolitan Manila area, a representative authorized to appoint watchers,
furnishing the provincial election supervisor or the city election registrar, as the case may be, the names
of such representatives. The provincial election supervisors shall furnish the municipal election registrars
and election registrars of component cities with the list of such representatives.

In the case of Metropolitan Manila, the designation of the persons authorized to appoint watchers shall be
filed with the Commission, which shall furnish the list of such representatives to the respective city and
municipal election registrars.

61
Section 179. Rights and duties of watchers. - Upon entering the polling place, the watchers shall present
and deliver to the chairman of the board of election inspectors his appointment, and forthwith, his name
shall be recorded in the minutes with a notation under his signature that he is not disqualified under the
second paragraph of Section 178. The appointments of the watchers shall bear the personal signature or
the facsimile signature of the candidate or the duly authorized representatives of the political party or
coalition of political parties who appointed him or of organizations authorized by the Commission under
Section 180. The watchers shall have the right to stay in the space reserved for them inside the polling
place. They shall have the right to witness and inform themselves of the proceedings of the board of
election inspectors, including its proceedings during the registration of voters, to take notes of what they
may see or hear, to take photographs of the proceedings and incidents, if any, during the counting of
votes, as well as of election returns, tally boards and ballot boxes, to file a protest against any irregularity
or violation of law which they believe may have been committed by the board of election inspectors or by
any of its members or by any persons, to obtain from the board of election inspectors a certificate as to the
filing of such protest and/or of the resolution thereon, to read the ballots after they shall have been read by
the chairman, as well as the election returns after they shall have been completed and signed by the
members of the board of election inspectors without touching them, but they shall not speak to any
member of the board of election inspectors, or to any voter, or among themselves, in such a manner as
would distract the proceedings, and to be furnished with a certificate of the number of votes in words and
figures cast for each candidate, duly signed and thumbmarked by the chairman and all the members of the
board of election inspectors. Refusal of the chairman and the members of the board of election inspectors
to sign and furnish such certificate shall constitute an election offense and shall be penalized under this
Code.

Section 180. Other watchers. - The duly accredited citizens arm of the Commission shall be entitled to
appoint a watcher in every polling place. Other civic, religious, professional, business, service, youth and
any other similar organizations, with prior authority of the Commission, shall be entitled collectively to
appoint one watcher in every polling place.

ARTICLE XVI
OFFICIAL BALLOTS AND ELECTION RETURNS

Section 181. Official ballots. - Ballots for national and local offices shall be of uniform size and color and
shall be provided at public expense. They shall be printed on paper with watermarks or other marks that
will readily distinguish the ballot paper from ordinary paper. Each ballot shall be in the shape of a strip
with stub and detachable coupon containing the serial number of the ballot, and a space for the
thumbmark of the voter on the detachable coupon. It shall bear at the top on the middle portion thereof the
coat of arms of the Republic of the Philippines, the words "Official Ballot", the name of the city or the
municipality and province in which the election is held, the date of the election, and the following notice:
"Fill out this ballot secretly inside the voting booth. Do not put any distinctive mark on any part of this
ballot."

The ballot shall also contain the names of all the offices to be voted for in the election, allowing opposite
the name of each office, sufficient space or spaces with horizontal lines where the voter may write the
name or names of the individual candidates voted for by him.

There shall not be anything on the reverse side of the ballot.

Ballots in cities and municipalities where Arabic is of general use shall have each of the titles of offices to
be voted printed in Arabic in addition to and immediately below the English title.

62
Notwithstanding the preceding provisions of this section, the Commission is hereby empowered to
prescribe a different form of ballot to facilitate voting by illiterate voters and to use or adopt the latest
technological and electronic devices as authorized under paragraph (i) of Section 52 hereof.

Section 182. Emergency ballots. - No ballots other than the official ballots shall be used or counted,
except in the event of failure to receive the official ballots on time, or where there are no sufficient ballots
for all registered voters or where they are destroyed at such time as shall render it impossible to provide
other official ballots, in which cases the city or municipal treasurer shall provide other ballots which shall
be as similar to the official ones as circumstances will permit and which shall be uniform within each
polling place. The treasurer shall immediately report such action to the Commission.

The municipal treasurer shall not undertake the preparation of the emergency ballots unless the political
parties, candidates and the organizations collectively authorized by the Commission to designate watchers
have been sufficiently notified to send their representatives and have agreed in writing to the preparation
and use of emergency ballots.

Section 183. Requisition of official ballots and election returns. - Official ballots and election returns
shall be printed upon orders of the Commission. Requisition of official ballots shall be for each city and
municipality, at the rate of one and one-fifth ballots for every registered voter in the next preceding
election; and for election returns, at one set thereof for every polling place.

Section 184. Printing of official ballots and elections returns. - The official ballots and election returns
shall be printed by the Government Printing Office and/or the Central Bank printing facilities exclusively,
under the exclusive supervision and control of the Commission which shall determine and provide the
necessary security measures in the printing, storage and distribution thereof.

Each ballot shall be joined by a perforated line to a stub numbered consecutively, beginning with number
"1" in each city and municipality. Each ballot shall also have at the bottom a detachable coupon bearing
the same number of the stub. Each pad of ballots shall bear on its cover the name of the city or
municipality in which the ballots are to be used and the inclusive serial numbers of the ballots contained
therein.

The official ballots shall be bound in separate pads of fifty or one hundred ballots each as may be
required.

The election returns shall be prepared in sets of six copies per set and shall be numbered consecutively,
beginning with number "1" in each city and municipality. Each set of the election returns shall be printed
in such a manner that will ensure that the entries on the original of the returns are clearly reproduced on
the other copies thereof and shall bear the name of the city or municipality in which the returns are to be
used. For this purposes, the Commission shall acquire, if necessary, a special kind of carbon paper or
chemically treated paper.

Section 185. Sample official ballots. - The Commission shall provide the board of election inspectors
with sample official ballots at the rate of thirty ballots per polling place. The sample official ballots shall
be printed on colored paper, in all respects like the official ballots but bearing instead the words "Sample
Official Ballot", to be shown to the public and used in demonstrating how to fill out and fold the official
ballots properly. No name of any actual candidate shall be written on the spaces for voting on the sample
official ballots provided by the Commission, nor shall they be used for voting.

63
Section 186. Distribution of official ballots and election returns. - The official ballots and the election
returns shall be distributed by the Commission to each city and municipality at the rate of one and one-
fifth ballots for every voter registered in each polling place; and for election returns, at the rate of one set
each for every polling place.

The provincial, city or municipal treasurer shall respectively keep a record of the quantity and serial
numbers of official ballots and election returns furnished the various provinces, cities, municipalities and
polling places, as the case may be, legible copies of which record shall be furnished the duly authorized
provincial, city or municipal representatives of the ruling party and the dominant opposition party, and the
Commission immediately after the distribution is made of such official ballots and election returns.

The Commission shall prescribe the use of official delivery receipts to be signed by the election registrar
and the chairman of the board of canvassers upon receipt of the election returns.

No official ballots or election returns shall be delivered to the board of election inspectors earlier than the
first hour of election day: Provided, however, That the Commission, after written notice to the registered
political parties and the candidates, may, for justifiable reasons, authorize the delivery of said official
ballots and election returns to the board of election inspectors of any particular polling place at an earlier
date.

Section 187. Committee on printing, storage, and distribution of official ballots and election returns.
- The Commission shall appoint a committee of five members, two of whom shall be from among its
personnel, the third to be designated by the Commission on Audit, and the last two to be designated by
the ruling party and the dominant opposition party to act as its representatives in supervising the printing,
storage and distribution of official ballots and election returns.

Upon the request of any candidate, political party or of civic, religious, professional, business, service,
youth or any similar organizations collectively designated by the Commission, the latter shall allow any
person designated by any of the former as watcher to observe the proceedings of the committee on the
printing of official ballots and election returns, file objections, if any, witness the printing and distribution
of the ballots and the returns and guard the premises of the printer.

Section 188. Duties of the committee on printing of official ballots and election returns. - Under such
orders or instructions as the Commission may issue, and in addition to general supervision and control
over the printing and shipment of official ballots and election returns, the committee on printing of
official ballots and election returns shall (a) take charge of the room or rooms where the paper and
paraphernalia used in the printing of official ballots and election returns are stored and where printed
official ballots and election returns are packed and prepared for shipment, (b) supervise all aspects
relating to the printing, storage and shipment of official ballots and election returns and report to the
Commission any irregularity which they believe may have been committed, and (c) perform such other
related functions as the Commission may direct.

Section 189. Representatives of the registered political parties in the verification and distribution of
official ballots and election returns. - The ruling party and the dominant opposition party or their
respective duly authorized representatives in the different provinces, cities and municipalities, shall
submit the names of their respective watchers who, together with the representatives of the Commission
and the provincial, city and municipal treasurer shall verify the contents of the boxes containing the
shipment of official ballots, election returns and sample official ballots received by the said treasurers.
The provincial treasurers shall keep a record of their receipt and distribution to each municipal treasurer,

64
while the city and municipal treasurer shall each keep a record of their distribution to the board of election
inspectors.

ARTICLE XVII
CASTING OF VOTES

Section 190. Voting hours. - The casting of votes shall start at seven o'clock in the morning and shall end
at three o'clock in the afternoon, except when there are voters present within thirty meters in front of the
polling place who have not yet cast their votes, in which case the voting shall continue but only to allow
said voters to cast their votes without interruption. The poll clerk shall, without delay, prepare a complete
list containing the names of said voters consecutively numbered, and the voters so listed shall be called to
vote by announcing each name repeatedly three times in the order in which they are listed. Any voter in
the list who is not present when his name is called out shall not be permitted to vote.

Section 191. Preliminaries to the voting. -

(a) The board of election inspectors shall meet at the polling place at six-thirty o'clock in the
morning of election day and shall have the book of voters containing all the approved
applications of registration of voters pertaining to the polling place, the certified list of voters, the
certified list of candidates, the ballot box, the official ballots, sufficient indelible pencils or ball
pens for the use of the voters, the forms to be used, and all other materials which may be
necessary.

(b) Immediately thereafter, the chairman of the board of election inspectors shall open the ballot
box, empty both of its compartments, exhibit them to all those present and being empty, lock its
interior covers with three padlocks.

(c) The chairman shall forthwith show to the public and the watchers present the package of
official ballots received from the city, or municipal treasurer duly wrapped and sealed and the
number of pads, the serial numbers and the type forms of the ballots in each pad appearing on the
cover, and the book of voters duly sealed. The board of election inspectors shall then break the
seals of the package of official ballots and the book of voters. The board of election inspectors
shall enter in the minutes the fact that the package of ballots, and the book of voters were shown
to the public with their wrapping and corresponding seals intact and/or if they find that the
wrapping and seals are broken, such fact must be stated in the minutes as well as the number of
pads and the serial numbers of ballots that they find in the package.

Ballots with separately printed serial numbers shall be deemed spurious and shall not be utilized
by the board of election inspectors unless the Commission representative shall order their use in
writing, stating the reasons therefor.

(d) The chairman and the two party members of the board of election inspectors shall retain in
their possession their respective keys to the padlocks during the voting.

(e) The box shall remain locked until the voting is finished and the counting begins. However, if
it should become necessary to make room for more ballots, the board of election inspectors may
open the box in the presence of the whole board of election inspectors and the watchers, and the
chairman shall press down with his hands the ballots contained therein without removing any of
them, after which the board of election inspectors shall close the box and lock it with three
padlocks as hereinbefore provided.

65
Section 192. Persons allowed in and around the polling place. - During the voting, no person shall be
allowed inside the polling place, except the members of the board of election inspectors, the watchers, the
representatives of the Commission, the voters casting their votes, the voters waiting for their turn to get
inside the booths whose number shall not exceed twice the number of booths and the voters waiting for
their turn to cast their votes whose number shall not exceed twenty at any one time. The watchers shall
stay only in the space reserved for them, it being illegal for them to enter places reserved for the voters or
for the board of election inspectors or to mingle and talk with the voters within the polling place.

It shall be unlawful for any officer or member of the Armed Forces of the Philippines including the
Philippine Constabulary or the Integrated National Police or peace officer or any armed person belonging
to any extra-legal police agency, special forces, reaction forces, strike forces, home defense units,
barangay tanod, or other similar forces or para-military forces, including special forces, security guards,
special policeman, and all other kinds of armed or unarmed extra-legal police officers, to enter any
polling place, unless it is his polling place where he will vote but in such case he should immediately
leave the polling place, no policeman or peace officer shall be allowed to enter or stay inside the polling
place except when there is an actual disturbance of the peace and order therein. However, the board of
election inspectors upon majority vote, if it deems necessary, may make a call in writing, duly entered in
the minutes, for the detail of a policeman or any peace officer for their protection or for the protection of
the election documents and paraphernalia, in which case, the said policeman or peace officer shall stay
outside the polling place within a radius of thirty meters near enough to be easily called by the board of
election inspectors at any time, but never at the door, and in no case shall the said policeman or peace
officer hold any conversation with any voter or disturb or prevent or in any manner obstruct the free
access of the voters to the polling place. It shall likewise be unlawful for any barangay official to enter
and stay inside any polling place except to vote or except when serving as a watcher or member of the
board of election inspectors, in which case, he shall leave the polling place immediately after voting.

Section 193. Order of voting. - The voters shall vote in the order of their entrance into the polling place.
The voters shall have the right to freely enter the polling place as soon as they arrive unless there are
voters waiting inside, in which case they shall fall in line in the order of their arrival and shall not crowd
around the table of the board of election inspectors. The voters after having cast their votes shall
immediately depart.

Section 194. Manner of obtaining ballots. - The voter shall approach the chairman and shall give his
name and address together with other data concerning his person. In case any member of the board of
election inspectors doubts the identity of the voter, the board of election inspectors shall check his voter's
identification card or, if he does not have any, the board of election inspectors shall refer to his
photograph and signature in the voter's application for registration. If the board of election inspectors is
satisfied with his identity, the chairman shall distinctly announce the voter's name in a tone loud enough
to be plainly heard throughout the polling place. If such voter has not been challenged, or if having been
challenged, the question has been decided in his favor, the voter shall forthwith affix his signature in the
proper space in the voting record, and the chairman shall, after first entering the number of the ballot in
the corresponding space of the voting record, deliver to the voter one ballot correctly folded. No person
other than the chairman shall deliver official ballots nor shall more than one ballot be delivered at one
time.

Section 195. Manner of preparing the ballot. - The voter, upon receiving his folded ballot, shall forthwith
proceed to one of the empty voting booths and shall there fill his ballot by writing in the proper space for
each office the name of the individual candidate for whom he desires to vote.

66
No voter shall be allowed to enter a booth occupied by another, nor enter the same accompanied by
somebody, except as provided for in the succeeding section hereof, nor stay therein for a longer time than
necessary, nor speak with anyone other than as herein provided while inside the polling place. It shall be
unlawful to prepare the ballot outside the voting booth, or to exhibit its contents to any person, or to erase
any printing from the ballot, or to intentionally tear or deface the same or put thereon any distinguishing
mark. It shall likewise be unlawful to use carbon paper, paraffin paper, or other means for making a copy
of the contents of the ballot or make use of any other means to identify the vote of the voter.

Section 196. Preparation of ballots for illiterate and disabled persons. - A voter who is illiterate or
physically unable to prepare the ballot by himself may be assisted in the preparation of his ballot by a
relative, by affinity or consanguinity within the fourth civil degree or if he has none, by any person of his
confidence who belong to the same household or any member of the board of election inspectors, except
the two party members: Provided, That no voter shall be allowed to vote as illiterate or physically
disabled unless it is so indicated in his registration record: Provided, further, That in no case shall an
assistor assist more than three times except the non-party members of the board of election inspectors.
The person thus chosen shall prepare the ballot for the illiterate or disabled voter inside the voting booth.
The person assisting shall bind himself in a formal document under oath to fill out the ballot strictly in
accordance with the instructions of the voter and not to reveal the contents of the ballot prepared by him.
Violation of this provision shall constitute an election offense.

Section 197. Spoiled ballots. - If a voter should accidentally spoil or deface a ballot in such a way that it
cannot lawfully be used, he shall surrender if folded to the chairman who shall note in the corresponding
space in the voting record that said ballot is spoiled. The voter shall then be entitled to another ballot
which the chairman shall give him after announcing the serial number of the second ballot and recording
said serial number in the corresponding spaces in the voting record. If the second ballot is again spoiled or
defaced in such a way that it cannot lawfully be used, the same shall be surrendered to the chairman and
recorded in the same manner as the first spoiled or defaced ballot. However, no voter shall change his
ballot more than twice.

The spoiled ballot shall, without being unfolded and without removing the detachable coupon, be
distinctly marked with the word "spoiled" and signed by the board of election inspectors on the
endorsement fold thereof and immediately placed in the compartment for spoiled ballots.

Section 198. Voting. -

(a) After the voter has filled his ballot he shall fold it in the same manner as when he received it
and return it to the chairman.

(b) In the presence of all the members of the board of election inspectors, he shall affix his
thumbmark on the corresponding space in the coupon, and deliver the folded ballot to the
chairman.

(c) The chairman, in the presence and view of the voter and all the members of the board of
election inspectors, without unfolding the ballot or seeing its contents, shall verify its number
from the voting record where it was previously entered.

(d) The voter shall fortwith affix his thumbmark by the side of his signature in the space intended
for that purpose in the voting record and the chairman shall apply silver nitrate and commassie
blue on the right forefinger nail or on any other available finger nail, if there be no forefinger nail.

67
 (e) The chairman shall sign in the proper space beside the thumbmark of the voter.

(f) The chairman, after finding everything to be in order, shall then detach the coupon in the
presence of the board of election inspectors and of the voter and shall deposit the folded ballot in
the compartment for valid ballots, and the detached coupon in the compartment for spoiled
ballots.

(g) The voter shall then depart.

Any ballot returned to the chairman whose detachable coupon has been removed not in the
presence of the board of election inspectors and of the voter, or any ballot whose number does not
coincide with the number of the ballot delivered to the voter, as entered in the voting record, shall
be considered as spoiled and shall be so marked and signed by the members of the board of
election inspectors.

Section 199. Challenge of illegal voters. -

(a) Any voter, or watcher may challenge any person offering to vote for not being registered, for
using the name of another or suffering from existing disqualification. In such case, the board of
election inspectors shall satisfy itself as to whether or not the ground for the challenge is true by
requiring proof of registration or the identity of the voter; and

(b) No voter shall be required to present his voter's affidavit on election day unless his identity is
challenged. His failure or inability to produce his voter's affidavit upon being challenged, shall
not preclude him from voting if his identity be shown from the photograph, fingerprints, or
specimen signatures in his approved application in the book of voters or if he is identified under
oath by a member of the board of election inspectors and such identification shall be reflected in
the minutes of the board.

Section 200. Challenge based on certain illegal acts. - Any voter or watcher may challenge any voter
offering to vote on the ground that the challenged person has received or expects to receive, has paid,
offered or promised to pay, has contributed, offered or promised to contribute money or anything of value
as consideration for his vote or for the vote of another; that he has made or received a promise to
influence the giving or withholding of any such vote or that he has made a bet or is interested directly or
indirectly in a bet which depends upon the result of the election. The challenged person shall take a
prescribed oath before the board of election inspectors that he has not committed any of the acts alleged in
the challenge. Upon the taking of such oath, the challenge shall be dismissed and the challenged voter
shall be allowed to vote, but in case of his refusal to take such oath, the challenge shall be sustained and
he shall not be allowed to vote.

Section 201. Admission of challenged vote immaterial in criminal proceedings. - The admission of the
challenged vote under the two preceding sections shall not be conclusive upon any court as to the legality
of the registration of the voter challenged or his vote in a criminal action against such person for illegal
registration or voting.

Section 202. Record of challenges and oaths. - The poll clerk shall keep a prescribed record of challenges
and oaths taken in connection therewith and the resolution of the board of election inspectors in each case
and, upon the termination of the voting, shall certify that it contains all the challenges made. The original
of this record shall be attached to the original copy of the minutes of the voting as provided in the
succeeding section.

68
Section 203. Minutes of voting and counting of votes. - The board of election inspectors shall prepare and
sign a statement in four copies setting forth the following:

1. The time the voting commenced and ended;

2. The serial numbers of the official ballots and election returns, special envelopes and seals
received;

3. The number of official ballots used and the number left unused;

4. The number of voters who cast their votes;

5. The number of voters challenged during the voting;

6. The names of the watchers present;

7. The time the counting of votes commenced and ended;

8. The number of official ballots found inside the compartment for valid ballots;

9. The number of valid ballots, if any, retrieved from the compartment for spoiled ballots;

10. The number of ballots, if any, found folded together;

11. The number of spoiled ballots withdrawn from the compartment for valid ballots;

12. The number of excess ballots;

13. The number of marked ballots;

14. The number of ballots read and counted;

15. The time the election returns were signed and sealed in their respective special envelopes;

16. The number and nature of protests made by watchers; and

17. Such other matters that the Commission may require.

Copies of this statement after being duly accomplished shall be sealed in separate envelopes and shall be
distributed as follows: (a) the original to the city or municipal election registrar; (b) the second copy to be
deposited inside the compartment for valid ballots of the ballot box; and (c) the third and fourth copies to
the representatives of the accredited political parties.

Section 204. Disposition of unused ballots at the close of the voting hours. - The chairman of the board of
election inspectors shall prepare a list showing the number of unused ballots together with the serial
numbers. This list shall be signed by all the members of the board of election inspectors, after which all
the unused ballots shall be torn halfway in the presence of the members of the board of election
inspectors.

69
Section 205. Prohibition of premature announcement of voting. - No member of the board of election
inspectors shall, before the termination of the voting, make any announcement as to whether a certain
registered voter has already voted or not, as to how many have already voted or how many so far have
failed to vote, or any other fact tending to show or showing the state of the polls, nor shall he make any
statement at any time, except as witness before a court, as to how any person voted.

ARTICLE XVIII
COUNTING OF VOTES

Section 206. Counting to be public and without interruption. - As soon as the voting is finished, the board
of election inspectors shall publicly count in the polling place the votes cast and ascertain the results. The
board of election inspectors shall not adjourn or postpone or delay the count until it has been fully
completed, unless otherwise ordered by the Commission.

The Commission, in the interest of free, orderly, and honest elections, may order the board of election
inspectors to count the votes and to accomplish the election returns and other forms prescribed under this
Code in any other place within a public building in the same municipality or city: Provided, That the said
public building shall not be located within the perimeter of or inside a military or police camp or
reservation nor inside a prison compound.

Section 207. Excess ballots. - Before proceeding to count the votes the board of election inspectors shall
count the ballots in the compartment for valid ballots without unfolding them or exposing their contents,
except so far as to ascertain that each ballot is single, and compare the number of ballots in the box with
the number of voters who have voted. If there are excess ballots, they shall be returned in the box and
thoroughly mixed therein, and the poll clerk, without seeing the ballots and with his back to the box, shall
publicly draw out as may ballots as may be equal to the excess and without unfolding them, place them in
an envelope which shall be marked "excess ballots" and which shall be sealed and signed by the members
of the board of election inspectors. The envelope shall be placed in the compartment for valid ballots, but
its contents shall not be read in the counting of votes. If in the course of the examination ballots are found
folded together before they were deposited in the box, they shall be placed in the envelope for excess
ballots. In case ballots with their detachable coupons be found in the box, such coupons shall be removed
and deposited in the compartment for spoiled ballots, and the ballots shall be included in the file of valid
ballots. If ballots with the words "spoiled" be found in the box, such ballots shall likewise be placed in the
compartment for spoiled ballots.

Section 208. Marked ballots. - The board of election inspectors shall then unfold the ballots and
determine whether there are any marked ballots, and, if any be found, they shall be placed in an envelope
labelled "marked ballots" which shall be sealed and signed by the members of the board of election
inspectors and placed in the compartment for valid ballots and shall not be counted. A majority vote of
the board of election inspectors shall be sufficient to determine whether any ballot is marked or not. Non-
official ballots which the board of election inspectors may find, except those which have been used as
emergency ballots, shall be considered as marked ballots.

Section 209. Compartment for spoiled ballots. - The ballots deposited in the compartment for spoiled
ballots shall be presumed to be spoiled ballots, whether or not they contain such notation; but if the board
of election inspectors should find that during the voting any valid ballot was erroneously deposited in this
compartment, or if any ballot separated as excess or marked had been erroneously deposited therein, the
board of election inspectors shall open said compartment after the voting and before the counting of votes

70
for the sole purpose of drawing out the ballots erroneously deposited therein. It shall then prepare and
sign a statement of such fact and lock the box with its three keys immediately thereafter. The valid ballots
so withdrawn shall be mixed with the other valid ballots, and the excess or marked ballots shall be placed
in their proper envelopes which shall for such purposes be opened and again labelled, sealed, signed and
kept as hereinafter provided.

Section 210. Manner of counting votes. - The counting of votes shall be made in the following manner:
the board of election inspectors shall unfold the ballots and form separate piles of one hundred ballots
each, which shall be held together with rubber bands, with cardboard of the size of the ballots to serve as
folders. The chairman of the board of election inspectors shall take the ballots of the first pile one by one
and read the names of candidates voted for and the offices for which they were voted in the order in
which they appear thereon, assuming such a position as to enable all of the watchers to read such names.
The chairman shall sign and affix his right hand thumbmark at the back of the ballot immediately after it
is counted. The poll clerk, and the third member, respectively, shall record on the election returns and the
tally board or sheet each vote as the names voted for each office are read.

Each vote shall be recorded by a vertical line, except every fifth vote which shall be recorded by a
diagonal line crossing the previous four vertical lines. One party member shall see to it that the chairman
reads the vote as written on the ballot, and the other shall check the recording of the votes on the tally
board or sheet and the election returns seeing to it that the same are correctly accomplished. After
finishing the first pile of ballots, the board of election inspectors shall determine the total number of votes
recorded for each candidate, the sum being noted on the tally board or sheet and on the election returns. In
case of discrepancy such recount as may be necessary shall be made. The ballots shall then be grouped
together again as before the reading. Thereafter, the same procedure shall be followed with the second
pile of ballots and so on successively. After all the ballots have been read, the board of election inspectors
shall sum up the totals recorded for each candidate, and the aggregate sum shall be recorded both on the
tally board or sheet and on the election returns. It shall then place the counted ballots in an envelope
provided for the purpose, which shall be closed signed and deposited in the compartment for valid ballots.
The tally board or sheet as accomplished and certified by the board of election inspectors shall not be
changed or destroyed but shall be kept in the compartment for valid ballots.

Section 211. Rules for the appreciation of ballots. - In the reading and appreciation of ballots, every
ballot shall be presumed to be valid unless there is clear and good reason to justify its rejection. The board
of election inspectors shall observe the following rules, bearing in mind that the object of the election is to
obtain the expression of the voter's will:

1. Where only the first name of a candidate or only his surname is written, the vote for such
candidate is valid, if there is no other candidate with the same first name or surname for the same
office.

2. Where only the first name of a candidate is written on the ballot, which when read, has a sound
similar to the surname of another candidate, the vote shall be counted in favor of the candidate
with such surname. If there are two or more candidates with the same full name, first name or
surname and one of them is the incumbent, and on the ballot is written only such full name, first
name or surname, the vote shall be counted in favor of the incumbent.

3. In case the candidate is a woman who uses her maiden or married surname or both and there is
another candidate with the same surname, a ballot bearing only such surname shall be counted in
favor of the candidate who is an incumbent.

71
4. When two or more words are written on the same line on the ballot, all of which are the
surnames of two or more candidates, the same shall not be counted for any of them, unless one is
a surname of an incumbent who has served for at least one year in which case it shall be counted
in favor of the latter.

When two or more words are written on different lines on the ballot all of which are the surnames
of two or more candidates bearing the same surname for an office for which the law authorizes
the election of more than one and there are the same number of such surnames written as there are
candidates with that surname, the vote shall be counted in favor of all the candidates bearing the
surname.

5. When on the ballot is written a single word which is the first name of a candidate and which is
at the same time the surname of his opponent, the vote shall be counted in favor of the latter.

6. When two words are written on the ballot, one of which is the first name of the candidate and
the other is the surname of his opponent, the vote shall not be counted for either.

7. A name or surname incorrectly written which, when read, has a sound similar to the name or
surname of a candidate when correctly written shall be counted in his favor;

8. When a name of a candidate appears in a space of the ballot for an office for which he is a
candidate and in another space for which he is not a candidate, it shall be counted in his favor for
the office for which he is a candidate and the vote for the office for which he is not a candidate
shall be considered as stray, except when it is used as a means to identify the voter, in which case,
the whole ballot shall be void.

If the word or words written on the appropriate blank on the ballot is the identical name or
surname or full name, as the case may be, of two or more candidates for the same office none of
whom is an incumbent, the vote shall be counted in favor of that candidate to whose ticket belong
all the other candidates voted for in the same ballot for the same constituency.

9. When in a space in the ballot there appears a name of a candidate that is erased and another
clearly written, the vote is valid for the latter.

10. The erroneous initial of the first name which accompanies the correct surname of a candidate,
the erroneous initial of the surname accompanying the correct first name of a candidate, or the
erroneous middle initial of the candidate shall not annul the vote in favor of the latter.

11. The fact that there exists another person who is not a candidate with the first name or surname
of a candidate shall not prevent the adjudication of the vote of the latter.

12. Ballots which contain prefixes such as "Sr.", "Mr.", "Datu", "Don", "Ginoo", "Hon.", "Gob."
or suffixes like "Hijo", "Jr.", "Segundo", are valid.

13. The use of the nicknames and appellations of affection and friendship, if accompanied by the
first name or surname of the candidate, does not annul such vote, except when they were used as
a means to identify the voter, in which case the whole ballot is invalid: Provided, That if the
nickname used is unaccompanied by the name or surname of a candidate and it is the one by
which he is generally or popularly known in the locality, the name shall be counted in favor of
said candidate, if there is no other candidate for the same office with the same nickname.

72
14. Any vote containing initials only or which is illegible or which does not sufficiently identify
the candidate for whom it is intended shall be considered as a stray vote but shall not invalidate
the whole ballot.

15. If on the ballot is correctly written the first name of a candidate but with a different surname,
or the surname of the candidate is correctly written but with different first name, the vote shall not
be counted in favor of any candidate having such first name and/or surname but the ballot shall be
considered valid for other candidates.

16. Any ballot written with crayon, lead pencil, or in ink, wholly or in part, shall be valid.

17. Where there are two or more candidates voted for in an office for which the law authorizes
the election of only one, the vote shall not be counted in favor of any of them, but this shall not
affect the validity of the other votes therein.

18. If the candidates voted for exceed the number of those to be elected, the ballot is valid, but the
votes shall be counted only in favor of the candidates whose names were firstly written by the
voter within the spaces provided for said office in the ballot until the authorized number is
covered.

19. Any vote in favor of a person who has not filed a certificate of candidacy or in favor of a
candidate for an office for which he did not present himself shall be considered as a stray vote but
it shall not invalidate the whole ballot.

20. Ballots containing the name of a candidate printed and pasted on a blank space of the ballot or
affixed thereto through any mechanical process are totally null and void.

21. Circles, crosses or lines put on the spaces on which the voter has not voted shall be considered
as signs to indicate his desistance from voting and shall not invalidate the ballot.

22. Unless it should clearly appear that they have been deliberately put by the voter to serve as
identification marks, commas, dots, lines, or hyphens between the first name and surname of a
candidate, or in other parts of the ballot, traces of the letter "T", "J", and other similar ones, the
first letters or syllables of names which the voter does not continue, the use of two or more kinds
of writing and unintentional or accidental flourishes, strokes, or strains, shall not invalidate the
ballot.

23. Any ballot which clearly appears to have been filled by two distinct persons before it was
deposited in the ballot box during the voting is totally null and void.

24. Any vote cast in favor of a candidate who has been disqualified by final judgment shall be
considered as stray and shall not be counted but it shall not invalidate the ballot.

25. Ballots wholly written in Arabic in localities where it is of general use are valid. To read
them, the board of election inspectors may employ an interpreter who shall take an oath that he
shall read the votes correctly.

26. The accidental tearing or perforation of a ballot does not annul it.

73
 27. Failure to remove the detachable coupon from a ballot does not annul such ballot.

28. A vote for the President shall also be a vote for the Vice-President running under the same
ticket of a political party, unless the voter votes for a Vice-President who does not belong to such
party.

Section 212. Election returns. - The board of election inspectors shall prepare the election returns
simultaneously with the counting of the votes in the polling place as prescribed in Section 210 hereof. The
return shall be prepared in sextuplicate. The recording of votes shall be made as prescribed in said
section. The entry of votes in words and figures for each candidate shall be closed with the signature and
the clear imprint of the thumbmark of the right hand of all the members, likewise to be affixed in full
view of the public, immediately after the last vote recorded or immediately after the name of the
candidate who did not receive any vote.

The returns shall also show the date of the election, the polling place, the barangay and the city of
municipality in which it was held, the total number of ballots found in the compartment for valid ballots,
the total number of valid ballots withdrawn from the compartment for spoiled ballots because they were
erroneously placed therein, the total number of excess ballots, the total number of marked or void ballots,
and the total number of votes obtained by each candidate, writing out the said number in words and
figures and, at the end thereof, the board of election inspectors shall certify that the contents are correct.
The returns shall be accomplished in a single sheet of paper, but if this is not possible, additional sheets
may be used which shall be prepared in the same manner as the first sheet and likewise certified by the
board of election inspectors.

The Commission shall take steps so that the entries on the first copy of the election returns are clearly
reproduced on the second, third, fourth, fifth, and sixth copies thereof, and for this purpose the
Commission shall use a special kind of paper.

Immediately upon the accomplishment of the election returns, each copy thereof shall be sealed in the
presence of the watchers and the public, and placed in the proper envelope, which shall likewise be sealed
and distributed as herein provided.

Any election return with a separately printed serial number or which bears a different serial number from
that assigned to the particular polling place concerned shall not be canvassed. This is to be determined by
the board of canvassers prior to its canvassing on the basis of the certification of the provincial, city or
municipal treasurer as to the serial number of the election return assigned to the said voting precinct,
unless the Commission shall order in writing for its canvassing, stating the reason for the variance in
serial numbers.

If the signatures and/or thumbmarks of the members of the board of election inspectors or some of them
as required in this provision are missing in the election returns, the board of canvassers may summon the
members of the board of election inspectors concerned to complete the returns.

Section 213. Proclamation of the result of the election in the polling place. - Upon the completion of the
election returns, the chairman of the board of election inspectors shall orally and publicly announce the
total number of votes received in the election in the polling place by each and every one of the candidates,
stating their corresponding office.

Section 214. Disposition of election returns. -

74
 (1) In a presidential election: the board of election inspectors shall prepare in handwriting and
sign the returns of the election in sextuplicate in their respective polling place in a form to be
prescribed by the Commission. One copy shall be deposited in the compartment of the ballot box
for valid ballots, and in the case of municipalities two copies including the original copy shall be
handed to the municipal election registrar who shall immediately deliver the original copy to the
provincial election supervisor and forward the other copy to the Commission, and one copy each
to the authorized representatives of the accredited political parties. In the case of the cities, the
city registrar shall retain the original copy for submission to the provincial election supervisor,
and forward the other copy to the Commission.

(2) In the election for Members of the Batasang Pambansa: the original of the election returns
shall be delivered to the election registrar of the city or municipality for transmittal to the
chairman of the provincial board of canvassers, and direct to the chairman of the city or district
board of canvassers in the urbanized cities and the districts of Metropolitan Manila, as the case
may be, for use in the canvass. The second copy shall likewise be delivered to the election
registrar for transmittal to the Commission. The third copy shall be deposited in the compartment
for valid ballots. The fourth copy shall be delivered to the election registrar who shall use said
copy in the tabulation of the advance results of the election in the city or municipality. The fifth
and sixth copies shall each respectively be delivered to the members representing political parties
represented in the board of election inspectors.

(3) In local elections: the original copy of the election returns shall be delivered to the city or
municipal board of canvassers as a body for its use in the city of municipal canvass. The second
copy shall be delivered to the election registrar of the city or municipality for transmittal to the
provincial board of canvassers as a body for its use in the provincial canvass. The third copy shall
likewise be delivered to the election registrar for transmittal to the Commission. The fourth copy
shall be deposited in the compartment for valid ballots. The fifth and sixth copies shall each
respectively be delivered to the members representing the political parties represented in the
board of election inspectors.

The Commission shall promulgate rules for the speedy and safe delivery of the election returns.

Section 215. Board of election inspectors to issue a certificate of the number of votes polled by the
candidates for an office to the watchers. - After the announcement of the results of the election and before
leaving the polling place, it shall be the duty of the board of election inspectors to issue a certificate of the
number of the votes received by a candidate upon request of the watchers. All the members of the board
of election inspectors shall sign the certificate.

Section 216. Alterations and corrections in the election returns. - Any correction or alteration made in
the election, returns by the board of election inspectors before the announcement of the results of the
election in the polling place shall be duly initialed by all the members thereof.

After the announcement of the results of the election in the polling place has been made, the board of
election inspectors shall not make any alteration or amendment in any of the copies of the election
returns, unless so ordered by the Commission upon petition of the members of the board of election
inspectors within five days from the date of the election or twenty-four hours from the time a copy of the
election returns concerned is opened by the board of canvassers, whichever is earlier. The petition shall be
accompanied by proof of service upon all candidates affected. If the petition is by all members of the
board of election inspectors and the results of the election would not be affected by said correction and
none of the candidates affected objects thereto, the Commission, upon being satisfied of the veracity of

75
the petition and of the error alleged therein, shall order the board of election inspectors to make the proper
correction on the election returns.

However, if a candidate affected by said petition objects thereto, whether the petition is filed by all or
only a majority of the members of the board of election inspectors and the results of the election would be
affected by the correction sought to be made, the Commission shall proceed summarily to hear the
petition. If it finds the petition meritorious and there are no evidence or signs indicating that the identity
and integrity of the ballot box have been violated, the Commission shall order the opening of the ballot
box. After satisfying itself that the integrity of the ballots therein has also been duly preserved, the
Commission shall order the recounting of the votes of the candidates affected and the proper corrections
made on the election returns, unless the correction sought is such that it can be made without need of
opening the ballot box.

Section 217. Delivery of the ballot boxes, keys and election supplies and documents. - Upon the
termination of the counting of votes, the board of election inspectors shall place in the compartment for
valid ballots, the envelopes for used ballots hereinbefore referred to, the unused ballots, the tally board or
sheet, a copy of the election returns, and the minutes of its proceedings, and then shall lock the ballot box
with three padlocks and such safety devices as the Commission may prescribe. Immediately after the box
is locked, the three keys of the padlocks shall be placed in three separate envelopes and shall be sealed
and signed by all the members of the board of election inspectors.

The authorized representatives of the Commission shall forthwith take delivery of said envelopes, signing
a receipt therefor, and deliver without delay one envelope to the provincial treasurer, another to the
provincial fiscal and the other to the provincial election supervisor.

The ballot box, all supplies of the board of election inspectors and all pertinent papers and documents
shall immediately be delivered by the board of election inspectors and the watchers to the city or
municipal treasurer who shall keep his office open all night on the day of election if necessary for this
purpose, and shall provide the necessary facilities for said delivery at the expense of the city or
municipality. The book of voters shall be returned to the election registrar who shall keep it under his
custody. The treasurer and the election registrar, as the case may be, shall on the day after the election
require the members of the board of election inspectors who failed to send the objects referred to herein to
deliver the same to him immediately and acknowledge receipt thereof in detail.

Section 218. Preservation of the voting record. - The voting record of each polling place shall be
delivered to the election registrar who shall have custody of the same, keeping them in a safe place, until
such time that the Commission shall give instructions on their disposition.

Section 219. Preservation of the ballot boxes, their keys and disposition of their contents. -

(a) The provincial election supervisor, the provincial treasurer and the provincial fiscal shall keep
the envelope containing the keys in their possession intact during the period of three months
following the election. Upon the lapse of this period, unless the Commission has ordered
otherwise, the provincial election supervisor and the provincial fiscal shall deliver to the
provincial treasurer the envelope containing the keys under their custody.

(b) The city and municipal treasurer shall keep the ballot boxes under their responsibility for three
months and stored unopened in a secure place, unless the Commission orders otherwise whenever
said ballot boxes are needed in any political exercise which might be called within the said
period, provided these are not involved in any election contest or official investigation, or the

76
 Commission or other competent authority shall demand them sooner or shall order their
preservation for a longer time in connection with any pending contest or investigation. However,
upon showing by any candidate that the boxes will be in danger of being violated if kept in the
possession of such officials, the Commission may order them kept by any other official whom it
may designate. Upon the lapse of said time and if there should be no order to the contrary, the
Commission may authorize the city and municipal treasurer in the presence of its representative
to open the boxes and burn their contents, except the copy of the minutes of the voting and the
election returns deposited therein which they shall take and keep.

(c) In case of calamity or fortuitous event such as fire, flood, storm, or other similar calamities
which may actually cause damage to the ballot boxes and/or their contents, the Commission may
authorize the opening of said ballot boxes to salvage the ballots and other contents by placing
them in other ballot boxes, taking such other precautionary measures as may be necessary to
preserve such documents.

Section 220. Documents and articles omitted or erroneously placed inside the ballot box. - If after the
delivery of the keys of the ballot box to the proper authorities, the board of election inspectors shall
discover that some documents or articles required to be placed in the ballot box were not placed therein,
the board of election inspectors, instead of opening the ballot box in order to place therein said documents
or articles, shall deliver the same to the Commission or its duly authorized representatives. In no instance
shall the ballot box be reopened to place therein or take out therefrom any document or article except to
retrieve copies of the election returns which will be needed in any canvass and in such excepted instances,
the members of the board of election inspectors and watchers of the candidates shall be notified of the
time and place of the opening of said ballot box: Provided, however, That if there are other copies of the
election returns outside of the ballot box which can be used in canvass, such copies of the election returns
shall be used in said canvass and the opening of the ballot box to retrieve copies of the election returns
placed therein shall then be dispensed with.

ARTICLE XIX
CANVASS AND PROCLAMATION

Section 221. Board of canvassers. - There shall be a board of canvassers for each province, city,
municipality, and district of Metropolitan Manila as follows:

(a) Provincial board of canvassers. - the provincial board of canvassers shall be composed of the
provincial election supervisor or a senior lawyer in the regional office of the Commission, as
chairman, the provincial fiscal, as vice-chairman, and the provincial superintendent of schools,
and one representative from each of the ruling party and the dominant opposition political party
in the constituency concerned entitled to be represented, as members.

(b) City board of canvassers. - the city board of canvassers shall be composed of the city election
registrar or a lawyer of the Commission, as chairman, the city fiscal and the city superintendent of
schools, and one representative from each of the ruling party and the dominant opposition
political party entitled to be represented, as members.

(c) District board of canvassers of Metropolitan Manila - the district board of canvassers shall be
composed of a lawyer of the Commission, as chairman, and a ranking fiscal in the district and the
most senior district school supervisor in the district to be appointed upon consultation with the
Ministry of Justice and the Ministry of Education, Culture and Sports, respectively, and one

77
 representative from each of the ruling party and the dominant opposition political party in the
constituency concerned, as members.

(d) Municipal board of canvassers. - the municipal board of canvassers shall be composed of the
election registrar or a representative of the Commission, as chairman, the municipal treasurer, and
the district supervisor or in his absence any public school principal in the municipality and one
representative from each of the ruling party and the dominant opposition political party entitled to
be represented, as members.

(e) Board of canvassers for newly created political subdivisions - the Commission shall constitute
a board of canvassers and appoint the members thereof for the first election in a newly created
province, city or municipality in case the officials who shall act as members thereof have not yet
assumed their duties and functions.

Section 222. Relationship with candidates and other members. - The chairman and the members of the
board of canvassers shall not be related within the fourth civil degree of consanguinity or affinity to any
of the candidates whose votes will be canvassed by said board, or to any member of the same board.

Section 223. Prohibition against leaving official station. - During the period beginning election day until
the proclamation of the winning candidates, no member or substitute member of the different boards of
canvassers shall be transferred, assigned or detailed outside of his official station, nor shall he leave said
station without prior authority of the Commission.

Section 224. Feigned illness. - Any member of the board of canvassers feigning illness in order to be
substituted on election day until the proclamation of the winning candidates shall be guilty of an election
offense.

Section 225. Vote required. - A majority vote of all the members of the board of canvassers shall be
necessary to render a decision.

Section 226. Incapacity and substitution of members of boards of canvassers. - In case of non-
availability, absence, disqualification due to relationship, or incapacity for any cause of the chairman, the
Commission shall designate the provincial or city fiscal to act as chairman. Likewise, in case of non-
availability, absence, disqualification due to relationship, or incapacity for any cause, of such designee,
the next ranking provincial or city fiscal shall be designated by the Commission and such designation
shall pass to the next in rank until the designee qualifies. With respect to the other members of the board
of canvassers, the Commission shall appoint as substitute the provincial, city or municipal officers of
other government agencies in the province, city or municipality, as the case may be, and with respect to
the representatives of the accredited political parties, the Commission shall appoint as substitutes those
nominated by the said political parties.

Section 227. Supervision and control over board of canvassers. - The Commission shall have direct
control and supervision over the board of canvassers.

Any member of the board of canvassers may, at any time, be relieved for cause and substituted motu
proprio by the Commission.

Section 228. Notice of meeting of the board. - At least five days before the meeting of the board, the
chairman of the board shall give notice to all members thereof and to each candidate and political party of
the date, time and place of the meeting.

78
Section 229. Manner of delivery and transmittal of election returns. -

(a) For the city and municipal board of canvassers, the copy of the election returns of a polling
place intended for the city or municipal board of canvassers, duly placed inside a sealed envelope
signed and affixed with the imprint of the thumb of the right hand of all the members of the board
of election inspectors, shall be personally delivered by the members of the board of election
inspectors to the city or municipal board of canvassers under proper receipt to be signed by all the
members thereof.

(b) For the provincial and district boards of canvassers in Metropolitan Manila, the copy of the
election returns of a polling place intended for the provincial or district board of canvassers in the
case of Metropolitan Manila, shall be personally delivered by the members of the board of
election inspectors to the election registrar for transmittal to the proper board of canvassers under
proper receipt to be signed by all the members thereof.

The election registrar concerned shall place all the returns intended for the board of canvassers inside a
ballot box provided with three padlocks whose keys shall be kept as follows: one by the election registrar,
another by the representative of the ruling party and the third by the representative of the dominant
political opposition party.

For this purpose, the two political parties shall designate their representatives whose names shall be
submitted to the election registrar concerned on or before the tenth day preceding the election. The three
in possession of the keys shall personally transmit the ballot box, properly locked, containing the election
returns to the board of canvassers. Watchers of political parties, coalition of political parties, and of
organizations collectively authorized by the Commission to designate watchers shall have the right to
accompany transmittal of the ballot boxes containing the election returns.

It shall be unlawful for any person to delay, obstruct, impede or prevent through force, violence, coercion,
intimidation or by any means which vitiates consent, the transmittal of the election returns or to take
away, abscond with, destroy, deface or mutilate or substitute the election returns or the envelope or the
ballot box containing the election returns or to violate the right of the watchers.

The watchers of the political parties, coalition of political parties and the candidates shall have the right to
accompany the members of the board of election inspectors or the election registrar in making the
delivery to the boards of canvassers.

Section 230. Safekeeping of transmitted election returns. - The board of canvassers shall keep the ballot
boxes containing the election returns in a safe and secure room before and after the canvass. The door to
the room must be padlocked by three locks with the keys thereof kept as follows: one with the chairman,
the other with the representative of the ruling party, and the other with the representative of the dominant
opposition political party. The watchers of candidates, political parties, coalition of political parties and
organization collectively authorized by the Commission to appoint watchers shall have the right to guard
the room. Violation of this right shall constitute an election offense.

Section 231. Canvass by the board. - The board of canvassers shall meet not later than six o'clock in the
afternoon of election day at the place designated by the Commission to receive the election returns and to
immediately canvass those that may have already been received. It shall meet continuously from day to
day until the canvass is completed, and may adjourn but only for the purpose of awaiting the other
election returns from other polling places within its jurisdiction. Each time the board adjourns, it shall
make a total of all the votes canvassed so far for each candidate for each office, furnishing the

79
Commission in Manila by the fastest means of communication a certified copy thereof, and making
available the data contained therein to the mass media and other interested parties. As soon as the other
election returns are delivered, the board shall immediately resume canvassing until all the returns have
been canvassed.

The respective board of canvassers shall prepare a certificate of canvass duly signed and affixed with the
imprint of the thumb of the right hand of each member, supported by a statement of the votes received by
each candidate in each polling place and, on the basis thereof, shall proclaim as elected the candidates
who obtained the highest number of votes cast in the province, city, municipality or barangay. Failure to
comply with this requirement shall constitute an election offense.

Subject to reasonable exceptions, the board of canvassers must complete their canvass within thirty-six
hours in municipalities, forty-eight hours in cities and seventy-two hours in provinces. Violation hereof
shall be an election offense punishable under Section 264 hereof.

With respect to the election for President and Vice-President, the provincial and city boards of canvassers
shall prepare in quintuplicate a certificate of canvass supported by a statement of votes received by each
candidate in each polling place and transmit the first copy thereof to the Speaker of the Batasang
Pambansa. The second copy shall be transmitted to the Commission, the third copy shall be kept by the
provincial election supervisor or city election registrar; the fourth and the fifth copies to each of the two
accredited political parties.

Section 232. Persons not allowed inside the canvassing room. - It shall be unlawful for any officer or
member of the Armed Forces of the Philippines, including the Philippine Constabulary, or the Integrated
National Police or any peace officer or any armed or unarmed persons belonging to an extra-legal police
agency, special forces, reaction forces, strike forces, home defense forces, barangay self-defense units,
barangay tanod, or of any member of the security or police organizations of government ministries,
commissions, councils, bureaus, offices, instrumentalities, or government-owned or controlled
corporations or their subsidiaries or of any member of a privately owned or operated security,
investigative, protective or intelligence agency performing identical or similar functions to enter the room
where the canvassing of the election returns are held by the board of canvassers and within a radius of
fifty meters from such room: Provided, however, That the board of canvassers by a majority vote, if it
deems necessary, may make a call in writing for the detail of policemen or any peace officers for their
protection or for the protection of the election documents and paraphernalia in the possession of the
board, or for the maintenance of peace and order, in which case said policemen or peace officers, who
shall be in proper uniform, shall stay outside the room within a radius of thirty meters near enough to be
easily called by the board of canvassers at any time.

Section 233. When the election returns are delayed, lost or destroyed. - In case its copy of the election
returns is missing, the board of canvassers shall, by messenger or otherwise, obtain such missing election
returns from the board of election inspectors concerned, or if said returns have been lost or destroyed, the
board of canvassers, upon prior authority of the Commission, may use any of the authentic copies of said
election returns or a certified copy of said election returns issued by the Commission, and forthwith direct
its representative to investigate the case and immediately report the matter to the Commission.

The board of canvassers, notwithstanding the fact that not all the election returns have been received by it,
may terminate the canvass and proclaim the candidates elected on the basis of the available election
returns if the missing election returns will not affect the results of the election.

80
Section 234. Material defects in the election returns. - If it should clearly appear that some requisites in
form or data had been omitted in the election returns, the board of canvassers shall call for all the
members of the board of election inspectors concerned by the most expeditious means, for the same board
to effect the correction: Provided, That in case of the omission in the election returns of the name of any
candidate and/or his corresponding votes, the board of canvassers shall require the board of election
inspectors concerned to complete the necessary data in the election returns and affix therein their initials:
Provided, further, That if the votes omitted in the returns cannot be ascertained by other means except by
recounting the ballots, the Commission, after satisfying itself that the identity and integrity of the ballot
box have not been violated, shall order the board of election inspectors to open the ballot box, and, also
after satisfying itself that the integrity of the ballots therein has been duly preserved, order the board of
election inspectors to count the votes for the candidate whose votes have been omitted with notice thereof
to all candidates for the position involved and thereafter complete the returns.

The right of a candidate to avail of this provision shall not be lost or affected by the fact that an election
protest is subsequently filed by any of the candidates.

Section 235. When election returns appear to be tampered with or falsified. - If the election returns
submitted to the board of canvassers appear to be tampered with, altered or falsified after they have left
the hands of the board of election inspectors, or otherwise not authentic, or were prepared by the board of
election inspectors under duress, force, intimidation, or prepared by persons other than the member of the
board of election inspectors, the board of canvassers shall use the other copies of said election returns
and, if necessary, the copy inside the ballot box which upon previous authority given by the Commission
may be retrieved in accordance with Section 220 hereof. If the other copies of the returns are likewise
tampered with, altered, falsified, not authentic, prepared under duress, force, intimidation, or prepared by
persons other than the members of the board of election inspectors, the board of canvassers or any
candidate affected shall bring the matter to the attention of the Commission. The Commission shall then,
after giving notice to all candidates concerned and after satisfying itself that nothing in the ballot box
indicate that its identity and integrity have been violated, order the opening of the ballot box and, likewise
after satisfying itself that the integrity of the ballots therein has been duly preserved shall order the board
of election inspectors to recount the votes of the candidates affected and prepare a new return which shall
then be used by the board of canvassers as basis of the canvass.

Section 236. Discrepancies in election returns. - In case it appears to the board of canvassers that there
exists discrepancies in the other authentic copies of the election returns from a polling place or
discrepancies in the votes of any candidate in words and figures in the same return, and in either case the
difference affects the results of the election, the Commission, upon motion of the board of canvassers or
any candidate affected and after due notice to all candidates concerned, shall proceed summarily to
determine whether the integrity of the ballot box had been preserved, and once satisfied thereof shall
order the opening of the ballot box to recount the votes cast in the polling place solely for the purpose of
determining the true result of the count of votes of the candidates concerned.

Section 237. When integrity of ballots is violated. - If upon the opening of the ballot box as ordered by
the Commission under Sections 234, 235 and 236, hereof, it should appear that there are evidence or signs
of replacement, tampering or violation of the integrity of the ballots, the Commission shall not recount the
ballots but shall forthwith seal the ballot box and order its safekeeping.

Section 238. Canvass of remaining or unquestioned returns to continue. - In cases under Sections 233,
234, 235 and 236 hereof, the board of canvassers shall continue the canvass of the remaining or
unquestioned election returns. If, after the canvass of all the said returns, it should be determined that the
returns which have been set aside will affect the result of the election, no proclamation shall be made

81
except upon orders of the Commission after due notice and hearing. Any proclamation made in violation
hereof shall be null and void.

Section 239. Watchers. - Each candidate, political party or coalition of political parties shall be entitled to
appoint one watcher in the board of canvassers. The watcher shall have the right to be present at, and take
note of, all the proceedings of the board of canvassers, to read the election returns without touching them,
to file a protest against any irregularity in the election returns submitted, and to obtain from the board of
canvassers a resolution thereon.

Section 240. Election resulting in tie. - Whenever it shall appear from the canvass that two or more
candidates have received an equal and highest number of votes, or in cases where two or more candidates
are to be elected for the same position and two or more candidates received the same number of votes for
the last place in the number to be elected, the board of canvassers, after recording this fact in its minutes,
shall by resolution, upon five days notice to all the tied candidates, hold a special public meeting at which
the board of canvassers shall proceed to the drawing of lots of the candidates who have tied and shall
proclaim as elected the candidates who may be favored by luck, and the candidates so proclaimed shall
have the right to assume office in the same manner as if he had been elected by plurality of vote. The
board of canvassers shall forthwith make a certificate stating the name of the candidate who had been
favored by luck and his proclamation on the basis thereof.

Nothing in this section shall be construed as depriving a candidate of his right to contest the election.

ARTICLE XX
PRE-PROCLAMATION CONTROVERSIES

Section 241. Definition. - A pre-proclamation controversy refers to any question pertaining to or affecting
the proceedings of the board of canvassers which may be raised by any candidate or by any registered
political party or coalition of political parties before the board or directly with the Commission, or any
matter raised under Sections 233, 234, 235 and 236 in relation to the preparation, transmission, receipt,
custody and appreciation of the election returns.

Section 242. Commission's exclusive jurisdiction of all pre-proclamation controversies. - The

Commission shall have exclusive jurisdiction of all pre-proclamation controversies. It may motu proprio
or upon written petition, and after due notice and hearing, order the partial or total suspension of the
proclamation of any candidate-elect or annual partially or totally any proclamation, if one has been made,
as the evidence shall warrant in accordance with the succeeding sections.

Section 243. Issues that may be raised in pre-proclamation controversy. - The following shall be proper
issues that may be raised in a pre-proclamation controversy:

(a) Illegal composition or proceedings of the board of canvassers;

(b) The canvassed election returns are incomplete, contain material defects, appear to be
tampered with or falsified, or contain discrepancies in the same returns or in other authentic
copies thereof as mentioned in Sections 233, 234, 235 and 236 of this Code;

(c) The election returns were prepared under duress, threats, coercion, or intimidation, or they are
obviously manufactured or not authentic; and

82
 (d) When substitute or fraudulent returns in controverted polling places were canvassed, the
results of which materially affected the standing of the aggrieved candidate or candidates.

Section 244. Contested composition or proceedings of the board. - When the composition or proceedings
of the board of canvassers are contested, the board of canvassers shall, within twenty-four hours, make a
ruling thereon with notice to the contestant who, if adversely affected, may appeal the matter to the
Commission within five days after the ruling with proper notice to the board of canvassers. After due
notice and hearing, the Commission shall decide the case within ten days from the filing thereof. During
the pendency of the case, the board of canvassers shall suspend the canvass until the Commission orders
the continuation or resumption thereof and citing their reasons or grounds therefor.

Section 245. Contested election returns. - Any candidate, political party or coalition of political parties,
contesting the inclusion or exclusion in the canvass of any election returns on any of the grounds
authorized under this article or in Sections 234, 235 and 236 of Article XIX shall submit their verbal
objections to the chairman of the board of canvassers at the time the questioned returns is presented for
inclusion or exclusion, which objections shall be noted in the minutes of the canvassing.

The board of canvassers upon receipt of any such objections shall automatically defer the canvass of the
contested returns and shall proceed to canvass the rest of the returns which are not contested by any party.

Within twenty-four hours from and after the presentation of a verbal objection, the same shall be
submitted in written form to the board of canvassers. Thereafter, the board of canvassers shall take up
each contested return, consider the written objections thereto and summarily rule thereon. Said ruling
shall be made oral initially and then reduced to writing by the board within twenty-four hours from the
time the oral ruling is made.

Any party adversely affected by an oral ruling on its/his objection shall immediately state orally whether
it/he intends to appeal said ruling. The said intent to appeal shall be stated in the minutes of the
canvassing. If a party manifests its intent to appeal, the board of canvassers shall set aside the return and
proceed to rule on the other contested returns. When all the contested returns have been ruled upon by it,
the board of canvassers shall suspend the canvass and shall make an appropriate report to the
Commission, copy furnished the parties.

The board of canvassers shall not proclaim any candidate as winner unless authorized by the Commission
after the latter has ruled on the objections brought to it on appeal by the losing party and any proclamation
made in violation hereof shall be void ab initio, unless the contested returns will not adversely affect the
results of the election.

Section 246. Summary proceedings before the Commission. - All pre-proclamation controversies shall be
heard summarily by the Commission after due notice and hearing, and its decisions shall be executory
after the lapse of five days from receipt by the losing party of the decision of the Commission, unless
restrained by the Supreme Court.

Section 247. Partial proclamation. - Notwithstanding the pendency of any pre-proclamation controversy,
the Commission may, motu proprio or upon the filing of a verified petition and after due notice and
hearing, order the proclamation of other winning candidates whose election will not be affected by the
outcome of the controversy.

83
Section 248. Effect of filing petition to annual or to suspend the proclamation. - The filing with the
Commission of a petition to annual or to suspend the proclamation of any candidate shall suspend the
running of the period within which to file an election protest or quo warranto proceedings.

ARTICLE XXI
ELECTION CONTESTS

Section 249. Jurisdiction of the Commission. - The Commission shall be the sole judge of all contests
relating to the elections, returns, and qualifications of all Members of the Batasang Pambansa, elective
regional, provincial and city officials.

Section 250. Election contests for Batasang Pambansa, regional, provincial and city offices. - A sworn
petition contesting the election of any Member of the Batasang Pambansa or any regional, provincial or
city official shall be filed with the Commission by any candidate who has duly filed a certificate of
candidacy and has been voted for the same office, within ten days after the proclamation of the results of
the election.

Section 251. Election contests for municipal offices. - A sworn petition contesting the election of a
municipal officer shall be filed with the proper regional trial court by any candidate who has duly filed a
certificate of candidacy and has been voted for the same office, within ten days after proclamation of the
results of the election.

Section 252. Election contest for barangay offices. - A sworn petition contesting the election of a
barangay officer shall be filed with the proper municipal or metropolitan trial court by any candidate who
has duly filed a certificate of candidacy and has been voted for the same office, within ten days after the
proclamation of the results of the election. The trial court shall decide the election protest within fifteen
days after the filing thereof. The decision of the municipal or metropolitan trial court may be appealed
within ten days from receipt of a copy thereof by the aggrieved party to the regional trial court which
shall decide the case within thirty days from its submission, and whose decisions shall be final.

Section 253. Petition for quo warranto. - Any voter contesting the election of any Member of the
Batasang Pambansa, regional, provincial, or city officer on the ground of ineligibility or of disloyalty to
the Republic of the Philippines shall file a sworn petition for quo warranto with the Commission within
ten days after the proclamation of the results of the election.

Any voter contesting the election of any municipal or barangay officer on the ground of ineligibility or of
disloyalty to the Republic of the Philippines shall file a sworn petition for quo warranto with the regional
trial court or metropolitan or municipal trial court, respectively, within ten days after the proclamation of
the results of the election.

Section 254. Procedure in election contests. - The Commission shall prescribe the rules to govern the
procedure and other matters relating to election contests pertaining to all national, regional, provincial,
and city offices not later than thirty days before such elections. Such rules shall provide a simple and
inexpensive procedure for the expeditious disposition of election contests and shall be published in at
least two newspapers of general circulation.

However, with respect to election contests involving municipal and barangay offices the following rules
of procedure shall govern:

84
 (a) Notice of the protest contesting the election of a candidate for a municipal or barangay office
shall be served upon the candidate by means of a summons at the postal address stated in his
certificate of candidacy except when the protestee, without waiting for the summons, has made
the court understand that he has been notified of the protest or has filed his answer hereto;

(b) The protestee shall answer the protest within five days after receipt of the summons, or, in
case there has been no summons from the date of his appearance and in all cases before the
commencement of the hearing of the protest or contest. The answer shall deal only with the
election in the polling places which are covered by the allegations of the contest;

(c) Should the protestee desire to impugn the votes received by the protestant in other polling
places, he shall file a counter-protest within the same period fixed for the answer serving a copy
thereof upon the protestant by registered mail or by personal delivery or through the sheriff;

(d) The protestant shall answer the counter-protest within five days after notice;

(e) Within the period of five days counted from the filing of the protest any other candidate for
the same office may intervene in the case as other contestants and ask for affirmative relief in his
favor by a petition in intervention, which shall be considered as another contest, except that it
shall be substantiated within the same proceedings. The protestant or protestee shall answer the
protest in intervention within five days after notice;

(f) If no answer shall be filed to the contest, counter-protest, or to the protest in intervention,
within the time limits respectively fixed, a general denial shall be deemed to have been entered;

(g) In election contest proceedings, the permanent registry list of voters shall be conclusive in
regard to the question as to who had the right to vote in said election.

Section 255. Judicial counting of votes in election contest. - Where allegations in a protest or counter-
protest so warrant, or whenever in the opinion of the court the interests of justice so require, it shall
immediately order the book of voters, ballot boxes and their keys, ballots and other documents used in the
election be brought before it and that the ballots be examined and the votes recounted.

Section 256. Appeals. - Appeals from any decision rendered by the regional trial court under Section

251 and paragraph two, Section 253 hereof with respect to quo warranto petitions filed in election
contests affecting municipal officers, the aggrieved party may appeal to the Intermediate Appellate Court
within five days after receipt of a copy of the decision. No motion for reconsideration shall be entertained
by the court. The appeal shall be decided within sixty days after the case has been submitted for decision.

Section 257. Decision in the Commission. - The Commission shall decide all election cases brought
before it within ninety days from the date of their submission for decision. The decision of the
Commission shall become final thirty days after receipt of judgment.

Section 258. Preferential disposition of contests in courts. - The courts, in their respective cases, shall
give preference to election contests over all other cases, except those of habeas corpus, and shall without
delay, hear and, within thirty days from the date of their submission for decision, but in every case within
six months after filing, decide the same.

85
Section 259. Actual or compensatory damages. - Actual or compensatory damages may be granted in all
election contests or in quo warranto proceedings in accordance with law.

Section 260. Notice of decisions. - The clerk of court and the corresponding official in the Commission
before whom an election contest or a quo warranto proceeding has been instituted or where the appeal of
said case has been taken shall notify immediately the President of the Philippines of the final disposition
thereof. In election contests involving provincial, city, municipal, or barangay offices, notice of such final
disposition shall also be sent to the secretary of the local sanggunian concerned. If the decision be that
none of the parties has been legally elected, said official shall certify such decision to the President of the
Philippines and, in appropriate cases, to the Commission.

ARTICLE XXII
ELECTION OFFENSES

Section 261. Prohibited Acts. - The following shall be guilty of an election offense:

(a) Vote-buying and vote-selling. -

(1) Any person who gives, offers or promises money or anything of value, gives or
promises any office or employment, franchise or grant, public or private, or makes or
offers to make an expenditure, directly or indirectly, or cause an expenditure to be made
to any person, association, corporation, entity, or community in order to induce anyone or
the public in general to vote for or against any candidate or withhold his vote in the
election, or to vote for or against any aspirant for the nomination or choice of a candidate
in a convention or similar selection process of a political party.

(2) Any person, association, corporation, group or community who solicits or receives,
directly or indirectly, any expenditure or promise of any office or employment, public or
private, for any of the foregoing considerations.

(b) Conspiracy to bribe voters. - Two or more persons, whether candidates or not, who come to an
agreement concerning the commission of any violation of paragraph (a) of this section and decide
to commit it.

(c) Wagering upon result of election. - Any person who bets or wagers upon the outcome of, or
any contingency connected with an election. Any money or thing of value or deposit of money or
thing of value situated anywhere in the Philippines put as such bet or wager shall be forfeited to
the government.

(d) Coercion of subordinates. -

(1) Any public officer, or any officer of any public or private corporation or association,
or any head, superior, or administrator of any religious organization, or any employer or
land-owner who coerces or intimidates or compels, or in any manner influence, directly
or indirectly, any of his subordinates or members or parishioners or employees or house
helpers, tenants, overseers, farm helpers, tillers, or lease holders to aid, campaign or vote
for or against any candidate or any aspirant for the nomination or selection of candidates.

(2) Any public officer or any officer of any commercial, industrial, agricultural,
economic or social enterprise or public or private corporation or association, or any head,

86
 superior or administrator of any religious organization, or any employer or landowner
who dismisses or threatens to dismiss, punishes or threatens to punish be reducing his
salary, wage or compensation, or by demotion, transfer, suspension, separation,
excommunication, ejectment, or causing him annoyance in the performance of his job or
in his membership, any subordinate member or affiliate, parishioner, employee or house
helper, tenant, overseer, farm helper, tiller, or lease holder, for disobeying or not
complying with any of the acts ordered by the former to aid, campaign or vote for or
against any candidate, or any aspirant for the nomination or selection of candidates.

(e) Threats, intimidation, terrorism, use of fraudulent device or other forms of coercion. - Any
person who, directly or indirectly, threatens, intimidates or actually causes, inflicts or produces
any violence, injury, punishment, damage, loss or disadvantage upon any person or persons or
that of the immediate members of his family, his honor or property, or uses any fraudulent device
or scheme to compel or induce the registration or refraining from registration of any voter, or the
participation in a campaign or refraining or desistance from any campaign, or the casting of any
vote or omission to vote, or any promise of such registration, campaign, vote, or omission
therefrom.

(f) Coercion of election officials and employees. - Any person who, directly or indirectly,
threatens, intimidates, terrorizes or coerces any election official or employee in the performance
of his election functions or duties.

(g) Appointment of new employees, creation of new position, promotion, or giving salary
increases. - During the period of forty-five days before a regular election and thirty days before a
special election,

(1) any head, official or appointing officer of a government office, agency or

instrumentality, whether national or local, including government-owned or controlled
corporations, who appoints or hires any new employee, whether provisional, temporary
or casual, or creates and fills any new position, except upon prior authority of the
Commission. The Commission shall not grant the authority sought unless, it is satisfied
that the position to be filled is essential to the proper functioning of the office or agency
concerned, and that the position shall not be filled in a manner that may influence the
election.

As an exception to the foregoing provisions, a new employee may be appointed in case of

urgent need: Provided, however, That notice of the appointment shall be given to the
Commission within three days from the date of the appointment. Any appointment or
hiring in violation of this provision shall be null and void.

(2) Any government official who promotes, or gives any increase of salary or
remuneration or privilege to any government official or employee, including those in
government-owned or controlled corporations.

(h) Transfer of officers and employees in the civil service. - Any public official who makes or
causes any transfer or detail whatever of any officer or employee in the civil service including
public school teachers, within the election period except upon prior approval of the Commission.

(i) Intervention of public officers and employees. - Any officer or employee in the civil service,
except those holding political offices; any officer, employee, or member or the Armed Forces of

87
the Philippines, or any police force, special forces, home defense forces, barangay self-defense
units and all other para-military units that now exist or which may hereafter be organized who,
directly or indirectly, intervenes in any election campaign or engages in any partisan political
activity, except to vote or to preserve public order, if he is a peace officer.

(j) Undue influence. - It is unlawful for any person to promise any office or employment, public
or private, or to make or offer to make an expenditure, directly or indirectly, or to cause an
expenditure to be made to any person, association, corporation or entity, which may induce
anyone or the public in general either to vote or withhold his vote, or to vote for or against any
candidate in any election or any aspirant for the nomination or selection of an official candidate in
a convention of a political party. It is likewise unlawful for any person, association, corporation
or community, to solicit or receive, directly or indirectly, any expenditure or promise or any
office, or employment, public or private, for any of the foregoing considerations.

(k) Unlawful electioneering. - It is unlawful to solicit votes or undertake any propaganda on the
day of registration before the board of election inspectors and on the day of election, for or
against any candidate or any political party within the polling place and with a radius of thirty
meters thereof.

(l) Prohibition against dismissal of employees, laborers, or tenants. - No employee or laborer shall
be dismissed, nor a tenant be ejected from his landholdings for refusing or failing to vote for any
candidate of his employer or landowner. Any employee, laborer or tenant so dismissed or ejected
shall be reinstated and the salary or wage of the employee or laborer, or the share of the harvest of
the tenant, shall be restored to the aggrieved party upon application to the proper court.

(m) Appointment or use of special policemen, special agents, confidential agents or the like. -
During the campaign period, on the day before and on election day, any appointing authority who
appoints or any person who utilizes the services of special policemen, special agents, confidential
agents or persons performing similar functions; persons previously appointed as special
policemen, special agents, confidential agents or persons performing similar functions who
continue acting as such, and those who fail to turn over their firearms, uniforms, insignias and
other badges of authority to the proper officer who issued the same.

At the start of the aforementioned period, the barangay chairman, municipal mayor, city mayor,
provincial governor, or any appointing authority shall submit to the Commission a complete list
of all special policemen, special agents, confidential agents or persons performing similar
functions in the employ of their respective political subdivisions, with such particulars as the
Commission may require.

(n) Illegal release of prisoners before and after election. - The Director of the Bureau of Prisons,
any provincial warden, the keeper of the jail or the person or persons required by law to keep
prisoners in their custody who illegally orders or allows any prisoner detained in the national
penitentiary, or the provincial, city or municipal jail to leave the premises thereof sixty days
before and thirty days after the election. The municipal or city warden, the provincial warden, the
keeper of the jail or the person or persons required by law to keep prisoners in their custody shall
post in three conspicuous public places a list of the prisoners or detention prisoners under their
care. Detention prisoners must be categorized as such.

(o) Use of public funds, money deposited in trust, equipment, facilities owned or controlled by
the government for an election campaign. - Any person who uses under any guise whatsoever,

88
directly or indirectly, (1) public funds or money deposited with, or held in trust by, public
financing institutions or by government offices, banks, or agencies; (2) any printing press, radio,
or television station or audio-visual equipment operated by the Government or by its divisions,
sub-divisions, agencies or instrumentalities, including government-owned or controlled
corporations, or by the Armed Forces of the Philippines; or (3) any equipment, vehicle, facility,
apparatus, or paraphernalia owned by the government or by its political subdivisions, agencies
including government-owned or controlled corporations, or by the Armed Forces of the
Philippines for any election campaign or for any partisan political activity.

(p) Deadly weapons. - Any person who carries any deadly weapon in the polling place and within
a radius of one hundred meters thereof during the days and hours fixed by law for the registration
of voters in the polling place, voting, counting of votes, or preparation of the election returns.
However, in cases of affray, turmoil, or disorder, any peace officer or public officer authorized by
the Commission to supervise the election is entitled to carry firearms or any other weapon for the
purpose of preserving order and enforcing the law.

(q) Carrying firearms outside residence or place of business. - Any person who, although
possessing a permit to carry firearms, carries any firearms outside his residence or place of
business during the election period, unless authorized in writing by the Commission: Provided,
That a motor vehicle, water or air craft shall not be considered a residence or place of business or
extension hereof.

This prohibition shall not apply to cashiers and disbursing officers while in the performance of
their duties or to persons who by nature of their official duties, profession, business or occupation
habitually carry large sums of money or valuables.

(r) Use of armored land, water or air craft. - Any person who uses during the campaign period, on
the day before and on election day, any armored land, water or air craft, provided with any
temporary or permanent equipment or any other device or contraption for the mounting or
installation of cannons, machine guns and other similar high caliber firearms, including military
type tanks, half trucks, scout trucks, armored trucks, of any make or model, whether new,
reconditioned, rebuilt or remodelled: Provided, That banking or financial institutions and all
business firms may use not more than two armored vehicles strictly for, and limited to, the
purpose of transporting cash, gold bullion or other valuables in connection with their business
from and to their place of business, upon previous authority of the Commission.

(s) Wearing of uniforms and bearing arms. - During the campaign period, on the day before and
on election day, any member of security or police organization of government agencies,
commissions, councils, bureaus, offices, or government-owned or controlled corporations, or
privately-owned or operated security, investigative, protective or intelligence agencies, who
wears his uniform or uses his insignia, decorations or regalia, or bears arms outside the immediate
vicinity of his place of work: Provided, That this prohibition shall not apply when said member is
in pursuit of a person who has committed or is committing a crime in the premises he is guarding;
or when escorting or providing security for the transport of payrolls, deposits, or other valuables;
or when guarding the residence of private persons or when guarding private residences, buildings
or offices: Provided, further, That in the last case prior written approval of the Commission shall
be obtained. The Commission shall decide all applications for authority under this paragraph
within fifteen days from the date of the filing of such application.

89
During the same period, and ending thirty days thereafter any member of the Armed Forces of the
Philippines, special, forces, home defense forces, barangay self-defense units and all other para-
military units that now exist or which may hereafter be organized who wears his uniform or bears
arms outside the camp, garrison or barracks to which he is assigned or detailed or outside their
homes, in case of members of para-military units, unless (1) the President of the Philippines shall
have given previous authority therefor, and the Commission notified thereof in writing, or (2) the
Commission authorizes him to do so, which authority it shall give only when necessary to assist it
in maintaining free, orderly and honest elections, and only after notice and hearing. All personnel
of the Armed Forces authorized by the President or the Commission to bear arms or wear their
uniforms outside their camps and all police and peace officers shall bear their true name, rank and
serial number, if any, stitched in block letters on a white background on the left breast of their
uniform, in letters and numbers of a clearly legible design at least two centimeters tall, which
shall at all times remain visible and uncovered.

During the election period, whenever the Commission finds it necessary for the promotion of
free, orderly, honest and peaceful elections in a specific area, it shall confiscate or order the
confiscation of firearms of any member or members of the Armed Forces of the Philippines,
police forces, home defense forces, barangay self-defense units, and all other para-military units
that now exist, or which may hereafter be organized, or any member or members of the security
or police organization, government ministries, commissions, councils, bureaus, offices,
instrumentalities, or government-owned or controlled corporations and other subsidiaries, or of
any member or members of privately owned or operated security, investigative, protective or
intelligence agencies performing identical or similar functions.

(t) Policemen and provincial guards acting as bodyguards or security guards. - During the
campaign period, on the day before and on election day, any member of the city or municipal
police force, any provincial or sub-provincial guard, any member of the Armed Forces of the
Philippines, special forces, home defense forces, barangay self-defense units and all other para-
military units that now exist or which may hereafter be organized who acts as bodyguard or
security guard of any public official, candidate or any other person, and any of the latter who
utilizes the services of the former as bodyguard or security guard: Provided, That, after due notice
and hearing, when the life and security of a candidate is in jeopardy, the Commission is
empowered to assign at the candidate's choice, any member of the Philippine Constabulary or the
police force of any municipality within the province to act as his bodyguard or security guard in a
number to be determined by the Commission but not to exceed three per candidate: Provided,
however, That when the circumstances require immediate action, the Commission may issue a
temporary order allowing the assignment of any member of the Philippine Constabulary or the
local police force to act as bodyguard or security guard of the candidate, subject to confirmation
or revocation.

(u) Organization or maintenance of reaction forces, strike forces, or other similar forces. - Any
person who organizes or maintains a reaction force, strike force or similar force during the
election period.

The heads of all reaction forces, strike forces, or similar forces shall, not later than forty-five days
before the election, submit to the Commission a complete list of all members thereof with such
particulars as the Commission may require.

(v) Prohibition against release, disbursement or expenditure of public funds. - Any public official
or employee including barangay officials and those of government-owned or controlled

90
corporations and their subsidiaries, who, during forty-five days before a regular election and
thirty days before a special election, releases, disburses or expends any public funds for:

(1) Any and all kinds of public works, except the following:

(a) Maintenance of existing and/or completed public works project: Provided,

That not more than the average number of laborers or employees already
employed therein during the six-month period immediately prior to the beginning
of the forty-five day period before election day shall be permitted to work during
such time: Provided, further, That no additional laborers shall be employed for
maintenance work within the said period of forty-five days;

(b) Work undertaken by contract through public bidding held, or by negotiated

contract awarded, before the forty-five day period before election: Provided, That
work for the purpose of this section undertaken under the so-called "takay" or
"paquiao" system shall not be considered as work by contract;

(c) Payment for the usual cost of preparation for working drawings,
specifications, bills of materials, estimates, and other procedures preparatory to
actual construction including the purchase of materials and equipment, and all
incidental expenses for wages of watchmen and other laborers employed for such
work in the central office and field storehouses before the beginning of such
period: Provided, That the number of such laborers shall not be increased over
the number hired when the project or projects were commenced; and

(d) Emergency work necessitated by the occurrence of a public calamity, but

such work shall be limited to the restoration of the damaged facility.

No payment shall be made within five days before the date of election to laborers who
have rendered services in projects or works except those falling under subparagraphs (a),
(b), (c), and (d), of this paragraph.

This prohibition shall not apply to ongoing public works projects commenced before the
campaign period or similar projects under foreign agreements. For purposes of this
provision, it shall be the duty of the government officials or agencies concerned to report
to the Commission the list of all such projects being undertaken by them.

(2) The Ministry of Social Services and Development and any other office in other
ministries of the government performing functions similar to said ministry, except for
salaries of personnel, and for such other routine and normal expenses, and for such other
expenses as the Commission may authorize after due notice and hearing. Should a
calamity or disaster occur, all releases normally or usually coursed through the said
ministries and offices of other ministries shall be turned over to, and administered and
disbursed by, the Philippine National Red Cross, subject to the supervision of the
Commission on Audit or its representatives, and no candidate or his or her spouse or
member of his family within the second civil degree of affinity or consanguinity shall
participate, directly or indirectly, in the distribution of any relief or other goods to the
victims of the calamity or disaster; and

91
 (3) The Ministry of Human Settlements and any other office in any other ministry of the
government performing functions similar to said ministry, except for salaries of personnel
and for such other necessary administrative or other expenses as the Commission may
authorize after due notice and hearing.

(w) Prohibition against construction of public works, delivery of materials for public works and
issuance of treasury warrants and similar devices. - During the period of forty-five days preceding
a regular election and thirty days before a special election, any person who (a) undertakes the
construction of any public works, except for projects or works exempted in the preceding
paragraph; or (b) issues, uses or avails of treasury warrants or any device undertaking future
delivery of money, goods or other things of value chargeable against public funds.

(x) Suspension of elective provincial, city, municipal or barangay officer. - The provisions of law
to the contrary notwithstanding during the election period, any public official who suspends,
without prior approval of the Commission, any elective provincial, city, municipal or barangay
officer, unless said suspension will be for purposes of applying the "Anti-Graft and Corrupt
Practices Act" in relation to the suspension and removal of elective officials; in which case the
provisions of this section shall be inapplicable.

(y) On Registration of Voters:

(1) Any person who, having all the qualifications and none of the disqualifications of a
voter, fails without justifiable excuse to register as a voter in an election, plebiscite or
referendum in which he is qualified to vote.

(2) Any person who knowingly makes any false or untruthful statement relative to any of
the data or information required in the application for registration.

(3) Any person who deliberately imprints or causes the imprinting of blurred or indistinct
fingerprints on any of the copies of the application for registration or on the voter's
affidavit; or any person in charge of the registration of voters who deliberately or through
negligence, causes or allows the imprinting of blurred or indistinct fingerprints on any of
the aforementioned registration forms, or any person who tampers with the fingerprints in
said registration records.

(4) Any member of the board of election inspectors who approves any application which
on its face shows that the applicant does not possess all the qualifications prescribed by
law for a voter; or who disapproves any application which on its face shows that the
applicant possesses all such qualifications.

(5) Any person who, being a registered voter, registers anew without filing an application
for cancellation of his previous registration.

(6) Any person who registers in substitution for another whether with or without the
latter's knowledge or consent.

(7) Any person who tampers with or changes without authority any data or entry in any
voter's application for registration.

(8) Any person who delays, hinders or obstruct another from registering.

92
 (9) Any person who falsely certifies or identifies another as a bona fide resident of a
particular place or locality for the purpose of securing the latter's registration as a voter.

(10) Any person who uses the voter's affidavit of another for the purpose of voting,
whether or not he actually succeeds in voting.

(11) Any person who places, inserts or otherwise includes, as approved application for
registration in the book of voters or in the provincial or national central files of registered
voters, the application of any fictitious voter or any application that has not been
approved; or removes from, or otherwise takes out of the book of voters or the provincial
or national central files of registered voters any duly approved voter's application, except
upon lawful order of the Commission, or of a competent court or after proper cancellation
as provided in Sections 122, 123, 124 and 125 hereof.

(12) Any person who transfers or causes the transfer of the registration record of a voter
to the book of voters of another polling place, unless said transfer was due to a change of
address of the voter and the voter was duly notified of his new polling place.

(13) Any person who asks, demands, takes, accepts or possesses, directly or indirectly,
the voter's affidavit of another, in order to induce the latter to withhold his vote, or to vote
for or against any candidate in an election or any issue in a plebiscite or referendum. It
shall be presumed prima facie that the asking, demanding, taking, accepting, or
possessing is with such intent if done within the period beginning ten days before election
day and ending ten days after election day, unless the voter's affidavit of another and the
latter are both members of the same family.

(14) Any person who delivers, hands over, entrusts, gives, directly or indirectly his
voter's affidavit to another in consideration of money or other benefit or promises thereof,
or takes or accepts such voter's affidavit directly or indirectly, by giving or causing the
giving of money or other benefit or making or causing the making of a promise thereof.

(15) Any person who alters in any manner, tears, defaces, removes or destroys any
certified list of voters.

(16) Any person who takes, carries or possesses any blank or unused registration form
already issued to a city or municipality outside of said city or municipality except as
otherwise provided in this Code or when directed by express order of the court or of the
Commission.

(17) Any person who maliciously omits, tampers or transfers to another list the name of a
registered voter from the official list of voters posted outside the polling place.

(z) On voting:

(1) Any person who fails to cast his vote without justifiable excuse.

(2) Any person who votes more than once in the same election, or who, not being a
registered voter, votes in an election.

93
(3) Any person who votes in substitution for another whether with or without the latter's
knowledge and/or consent.

(4) Any person who, not being illiterate or physically disabled, allows his ballot to be
prepared by another, or any person who prepares the ballot of another who is not illiterate
or physically disabled, with or without the latter's knowledge and/or consent.

(5) Any person who avails himself of any means of scheme to discover the contents of
the ballot of a voter who is preparing or casting his vote or who has just voted.

(6) Any voter who, in the course of voting, uses a ballot other than the one given by the
board of election inspectors or has in his possession more than one official ballot.

(7) Any person who places under arrest or detains a voter without lawful cause, or
molests him in such a manner as to obstruct or prevent him from going to the polling
place to cast his vote or from returning home after casting his vote, or to compel him to
reveal how he voted.

(8) Any member of the board of election inspectors charged with the duty of reading the
ballot during the counting of votes who deliberately omits to read the vote duly written
on the ballot, or misreads the vote actually written thereon or reads the name of a
candidate where no name is written on the ballot.

(9) Any member of the board of election inspectors charged with the duty of tallying

the votes in the tally board or sheet, election returns or other prescribed form who
deliberately fails to record a vote therein or records erroneously the votes as read, or
records a vote where no such vote has been read by the chairman.

(10) Any member of a board of election inspectors who has made possible the casting of
more votes than there are registered voters.

(11) Any person who, for the purpose of disrupting or obstructing the election process or
causing confusion among the voters, propagates false and alarming reports or information
or transmits or circulates false orders, directives or messages regarding any matter
relating to the printing of official ballots, the postponement of the election, the transfer of
polling place or the general conduct of the election.

(12) Any person who, without legal authority, destroys, substitutes or takes away from
the possession of those having legal custody thereof, or from the place where they are
legally deposited, any election form or document or ballot box which contains official
ballots or other documents used in the election.

(13) Any person having legal custody of the ballot box containing the official ballots used
in the election who opens or destroys said box or removes or destroys its contents without
or against the order of the Commission or who, through his negligence, enables any
person to commit any of the aforementioned acts, or takes away said ballot box from his
custody.

94
 (14) Any member of the board of election inspectors who knowingly uses ballots other
than the official ballots, except in those cases where the use of emergency ballots is
authorized.

(15) Any public official who neglects or fails to properly preserve or account for any
ballot box, documents and forms received by him and kept under his custody.

(16) Any person who reveals the contents of the ballot of an illiterate or disabled voter
whom he assisted in preparing a ballot.

(17) Any person who, without authority, transfers the location of a polling place.

(18) Any person who, without authority, prints or causes the printing of any ballot or
election returns that appears as official ballots or election returns or who distributes or
causes the same to be distributed for use in the election, whether or not they are actually
used.

(19) Any person who, without authority, keeps, uses or carries out or causes to be kept,
used or carried out, any official ballot or election returns or printed proof thereof, type-
form mould, electro-type printing plates and any other plate, numbering machines and
other printing paraphernalia being used in connection with the printing of official ballots
or election returns.

(20) Any official or employee of any printing establishment or of the Commission or any
member of the committee in charge of the printing of official ballots or election returns
who causes official ballots or election returns to be printed in quantities exceeding those
authorized by the Commission or who distributes, delivers, or in any manner disposes of
or causes to be distributed, delivered, or disposed of, any official ballot or election returns
to any person or persons not authorized by law or by the Commission to receive or keep
official ballots or election returns or who sends or causes them to be sent to any place not
designated by law or by the Commission.

(21) Any person who, through any act, means or device, violates the integrity of any
official ballot or election returns before or after they are used in the election.

(22) Any person who removes, tears, defaces or destroys any certified list of candidates
posted inside the voting booths during the hours of voting.

(23) Any person who holds or causes the holding of an election on any other day than
that fixed by law or by the Commission, or stops any election being legally held.

(24) Any person who deliberately blurs his fingerprint in the voting record.

(aa) On Canvassing:

(1) Any chairman of the board of canvassers who fails to give due notice of the date, time
and place of the meeting of said board to the candidates, political parties and/or members
of the board.

95
 (2) Any member of the board of canvassers who proceeds with the canvass of the votes
and/or proclamation of any candidate which was suspended or annulled by the
Commission.

(3) Any member of the board of canvassers who proceeds with the canvass of votes
and/or proclamation of any candidate in the absence of quorum, or without giving due
notice of the date, time and place of the meeting of the board to the candidates, political
parties, and/or other members of the board.

(4) Any member of the board of canvassers who, without authority of the Commission,
uses in the canvass of votes and/or proclamation of any candidate any document other
than the official copy of the election returns.

(bb) Common to all boards of election inspectors and boards of canvassers:

(1) Any member of any board of election inspectors or board of canvassers who
deliberately absents himself from the meetings of said body for the purpose of
obstructing or delaying the performance of its duties or functions.

(2) Any member of any board of election inspectors or board of canvassers who, without
justifiable reason, refuses to sign and certify any election form required by this Code or
prescribed by the Commission although he was present during the meeting of the said
body.

(3) Any person who, being ineligible for appointment as member of any board of election
inspectors or board of canvassers, accepts an appointment to said body, assumes office,
and actually serves as a member thereof, or any of public officer or any person acting in
his behalf who appoints such ineligible person knowing him to be ineligible.

(4) Any person who, in the presence or within the hearing of any board of election
inspectors or board of canvassers during any of its meetings, conducts himself in such a
disorderly manner as to interrupt or disrupt the work or proceedings to the end of
preventing said body from performing its functions, either partly or totally.

(5) Any public official or person acting in his behalf who relieves any member of any
board of election inspectors or board of canvassers or who changes or causes the change
of the assignments of any member of said board of election inspectors or board of
canvassers without authority of the Commission.

(cc) On candidacy and campaign:

(1) Any political party which holds political conventions or meetings to nominate its
official candidates earlier that the period fixed in this Code.

(2) Any person who abstracts, destroys or cancels any certificate of candidacy duly filed
and which has not been cancelled upon order of the Commission.

(3) Any person who misleads the board of election inspectors by submitting any false or
spurious certificate of candidacy or document to the prejudice of a candidate.

96
 (4) Any person who, being authorized to receive certificates of candidacy, receives any
certificate of candidacy outside the period for filing the same and makes it appear that
said certificate of candidacy was filed on time; or any person who, by means of fraud,
threat, intimidation, terrorism or coercion, causes or compels the commission of said act.

(5) Any person who, by any device or means, jams, obstructs or interferes with a radio or
television broadcast of any lawful political program.

(6) Any person who solicits votes or undertakes any propaganda, on the day of election,
for or against any candidate or any political party within the polling place or within a
radius of thirty meters thereof.

(dd) Other prohibitions:

(1) Any person who sells, furnishes, offers, buys, serves or takes intoxicating liquor on
the days fixed by law for the registration of voters in the polling place, or on the day
before the election or on election day: Provided, That hotels and other establishments
duly certified by the Ministry of Tourism as tourist oriented and habitually in the business
of catering to foreign tourists may be exempted for justifiable reasons upon prior
authority of the Commission: Provided, further, That foreign tourists taking intoxicating
liquor in said authorized hotels or establishments are exempted from the provisions of
this subparagraph.

(2) Any person who opens in any polling place or within a radius of thirty meters thereof
on election day and during the counting of votes, booths or stalls of any kind for the sale,
dispensing or display of wares, merchandise or refreshments, whether solid or liquid, or
for any other purposes.

(3) Any person who holds on election day, fairs, cockfights, boxing, horse races, jai-alai
or any other similar sports.

(4) Refusal to carry election mail matter. - Any operator or employee of a public utility or
transportation company operating under a certificate of public convenience, including
government-owned or controlled postal service or its employees or deputized agents who
refuse to carry official election mail matters free of charge during the election period. In
addition to the penalty prescribed herein, such refusal shall constitute a ground for
cancellation or revocation of certificate of public convenience or franchise.

(5) Prohibition against discrimination in the sale of air time. - Any person who operates a
radio or television station who without justifiable cause discriminates against any
political party, coalition or aggroupment of parties or any candidate in the sale of air
time. In addition to the penalty prescribed herein, such refusal shall constitute a ground
for cancellation or revocation of the franchise.

Section 262. Other election offenses. - Violation of the provisions, or pertinent portions, of the following
sections of this Code shall constitute election offenses: Sections 9, 18, 74, 75, 76, 80, 81, 82, 83, 84, 85,
86, 87, 88, 89, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106 107, 108, 109, 110, 111, 112, 122,
123, 127, 128, 129, 132, 134, 135, 145, 148, 150, 152, 172, 173, 174, 178, 180, 182, 184, 185, 186, 189,
190, 191, 192, 194, 195, 196, 197, 198, 202, 203, 204, 205, 206, 207, 208, 209, 210, 211, 212, 213, 214,
215, 216, 217, 218, 219, 220, 223, 229, 230, 231, 233, 234, 235, 236, 239 and 240.

97
Section 263. Persons criminally liable. - The principals, accomplices, and accessories, as defined in the
Revised Penal Code, shall be criminally liable for election offenses. If the one responsible be a political
party or an entity, its president or head, the officials and employees of the same, performing duties
connected with the offense committed and its members who may be principals, accomplices, or
accessories shall be liable, in addition to the liability of such party or entity.

Section 264. Penalties. - Any person found guilty of any election offense under this Code shall be
punished with imprisonment of not less than one year but not more than six years and shall not be subject
to probation. In addition, the guilty party shall be sentenced to suffer disqualification to hold public office
and deprivation of the right of suffrage. If he is a foreigner, he shall be sentenced to deportation which
shall be enforced after the prison term has been served. Any political party found guilty shall be sentenced
to pay a fine of not less than ten thousand pesos, which shall be imposed upon such party after criminal
action has been instituted in which their corresponding officials have been found guilty.

In case of prisoner or prisoners illegally released from any penitentiary or jail during the prohibited period
as provided in Section 261, paragraph (n) of this Code, the director of prisons, provincial warden, keeper
of the jail or prison, or persons who are required by law to keep said prisoner in their custody shall, if
convicted by a competent court, be sentenced to suffer the penalty of prision mayor in its maximum
period if the prisoner or prisoners so illegally released commit any act of intimidation, terrorism of
interference in the election.

Any person found guilty of the offense of failure to register or failure to vote shall, upon conviction, be
fined one hundred pesos. In addition, he shall suffer disqualification to run for public office in the next
succeeding election following his conviction or be appointed to a public office for a period of one year
following his conviction.

Section 265. Prosecution. - The Commission shall, through its duly authorized legal officers, have the
exclusive power to conduct preliminary investigation of all election offenses punishable under this Code,
and to prosecute the same. The Commission may avail of the assistance of other prosecuting arms of the
government: Provided, however, That in the event that the Commission fails to act on any complaint
within four months from his filing, the complainant may file the complaint with the office of the fiscal or
with the Ministry of Justice for proper investigation and prosecution, if warranted.

Section 266. Arrest in connection with the election campaign. - No person shall be arrested and/or
detained at any time for any alleged offense committed during and in connection with any election
through any act or language tending to support or oppose any candidate, political party or coalition of
political parties under or pursuant to any order of whatever name or nature and by whomsoever issued
except only upon a warrant of arrest issued by a competent judge after all the requirements of the
Constitution shall have been strictly complied with.

If the offense charged is punishable under a presidential decree whether originally or by amendment of a
previous law, the death penalty shall not be imposed upon the offender except where murder, rape or
arson is involved. In all cases, the penalty shall not be higher than reclusion perpetua and the offender
shall be entitled to reasonable bail upon sufficient sureties to be granted speedily by the competent court.
Moreover, loss of the right of citizenship and confiscation of property shall not be imposed.

Any officer or a person who shall violate any provision of this section shall be punished by imprisonment
of not less than six (6) years and one (1) day nor more than twelve (12) years, with the accessory penalties
for election offenses. The provision of Section 267 of this Code shall not apply to prosecution under this
section.

98
Section 267. Prescription. - Election offenses shall prescribe after five years from the date of their
commission. If the discovery of the offense be made in an election contest proceedings, the period of
prescription shall commence on the date on which the judgment in such proceedings becomes final and
executory.

Section 268. Jurisdiction of courts. - The regional trial court shall have the exclusive original jurisdiction
to try and decide any criminal action or proceedings for violation of this Code, except those relating to the
offense of failure to register or failure to vote which shall be under the jurisdiction of the metropolitan or
municipal trial courts. From the decision of the courts, appeal will lie as in other criminal cases.

Section 269. Preferential disposition of election offenses. - The investigation and prosecution of cases
involving violations of the election laws shall be given preference and priority by the Commission on
Elections and prosecuting officials. Their investigation shall be commenced without delay, and shall be
resolved by the investigating officer within five days from its submission for resolution. The courts shall
likewise give preference to election offenses over all other cases, except petitions for writ of habeas
corpus. Their trial shall likewise be commenced without delay, and shall be conducted continuously until
terminated, and the case shall be decided within thirty days from its submission for decision.

ARTICLE XXIII
LEGAL FEES

Section 270. Collection of legal fees. - The Commission is hereby authorized to collect fees as follows:

(a) For furnishing certified transcript of records or copies of any record, decision or ruling or
entry of which any person is entitled to demand and receive a copy, for every page P 2.00

(b) For every certificate or writ or process 10.00

(c) For each certificate not on process 2.00

(d) In appropriate cases, for filing a second and succeeding motions for reconsideration 50.00

(e) For every search of any record of more than one year's standing and reading the same 10.00

Section 271. Payment of Fees. - The fees mentioned in the preceding section shall be paid to the cashier
of the Commission who shall in all cases issue a receipt for the same and shall enter the amount received
upon his book specifying the date when received, the fee, and the person from whom received. The
cashier shall immediately report such payment to the Commission.

ARTICLE XXIV
TRANSITORY PROVISIONS

Section 272. Pending actions. - Pending actions and causes of action arising before the effectivity of this
Code shall be governed by the laws then in force.

Section 273. Designation of certain pre-election acts immediately after the approval of this Code. - If it
should no longer be reasonably possible to observe the periods and dates herein prescribed for certain pre-
election acts in the election immediately following the approval of this Code, the Commission shall fix
other periods in order to ensure that voters shall not be deprived of their right of suffrage.

99
Section 274. Accreditation of dominant opposition party. - For purposes of the next local elections in
1986 and the next presidential elections in 1987 or earlier, the dominant opposition party shall be that
political party, group or organization or coalition of major national or regional political parties opposed to
the majority party which has the capability to wage a bona fide nationwide campaign as shown by the
extent of its organization and the number of Members of Parliament affiliated with it: Provided, however,
That with specific reference to the next local elections in constituencies which are represented in the
Batasang Pambansa by Members who do not belong either to the majority party or to the political party or
coalition of political parties described above, the representatives of the opposition in the board of election
inspectors, board of canvassers or other similar bodies shall be proposed exclusively by the party to which
said Member of the Batasang Pambansa belong: Provided, however, That it is registered before the next
local elections.

Any political party, group or organization or coalition of political parties seeking accreditation under this
section shall file a verified petition with the Commission on Elections stating therein such information as
may be necessary to enable the Commission to determine the qualifications for accreditation in
accordance with the standard herein provided.

The Commission on Elections shall accredit the dominant opposition party not later than thirty days
before the campaign period in every election.

In case a presidential election is held before the next local elections or before the presidential election in
1987, the provisions of the Constitution shall be enforced in determining which shall be the dominant
opposition party for purposes of the next local elections.

Section 275. Party representatives in the board of election inspectors. - Until such time as the two
accredited political parties are determined in accordance with the provisions of the Constitution, the two
members shall each be proposed by the ruling party and the dominant opposition party as may be
determined by the Commission pursuant to the provisions of this Code.

Section 276. Appropriations, and insurance for board of election inspectors. - The cost of holding the
next local elections provided in this Code shall be funded out of the current appropriations of the
Commission on Elections provided for this purpose. In case of deficiency, additional funding may be
provided out of the special activities fund intended for special priority activities authorized in the General
Appropriations Act.

The chairman and the poll clerk of the board of election inspectors shall receive per diem at the rate of
one hundred pesos on election day and fifty pesos on each of the registration and revision days. The
inspectors of the political parties shall be granted a per diem of fifty pesos on election day and twenty-five
pesos on each of the registration and revision days. Education support personnel of the Ministry of
Education, Culture and Sports shall receive a per diem of twenty-five pesos during election day.

Supervisors, principals and other administrators of the Ministry of Education, Culture and Sports who
may be asked by the Commission, and actually report, for supervisory assignment during registration and
election day shall be entitled to a per diem of fifty pesos.

The provincial, city and municipal treasurers shall receive per diem at the rate of one hundred pesos on
election day.

Payments of per diems under this section shall be made within seventy-two hours after the election or
registration day.

100
The chairman, poll clerk and party representatives in the board of election inspectors shall be insured with
the government Service Insurance System at fifty thousand pesos each under terms and conditions that
shall be agreed upon by the Chairman of the Commission, the Ministries of the Budget, and the Minister
of Education, Culture and Sports.

Section 277. Special election for President before 1987. - In case a vacancy in the Office of the President
occurs before the presidential election in 1987, the Speaker of the Batasang Pambansa shall act as
President until a President and a Vice-President or either of them shall have been elected and shall have
qualified. Their term of office shall commence at noon of the tenth day following their proclamation, and
shall end at noon on the thirtieth day of June of the sixth year thereafter.

The Acting President may not declare martial law or suspend the privilege of the writ of habeas corpus
without the prior consent of at least a majority of all the Members of the Batasang Pambansa, or issue any
decree, order or letter of instructions while the lawmaking power of the President is in force. He shall be
deemed automatically on leave and the Speaker Pro-Tempore shall act as Speaker. While acting as
President, the Speaker may not be removed. He shall not be eligible for election in the immediately
succeeding election for President and Vice-President.

The Batasang Pambansa shall, at ten o'clock in the morning of the third day after the vacancy occurs,
convene in accordance with its rules without need of a call and within seven days enact a law calling for a
special election to elect a President and a Vice-president to be held not earlier than forty-five days nor
later than sixty days from the time of such call. The bill calling such special election shall be deemed
certified under paragraph (2), Section 19, Article VIII of the Constitution and shall become law upon its
approval on third reading by the Batasang Pambansa. Appropriations for the special election shall be
charged against any current appropriations and shall be exempt from the requirements of paragraph (4),
Section 16 of Article VIII of the Constitution. As provided in the third paragraph, Section 9 of Article VII
thereof, the convening of the Batasang Pambansa cannot be suspended nor the special election postponed.
No special election shall be called if the vacancy occurs within seventy days before the date of the
presidential election of 1987.

Appointments extended by the Acting President shall remain effective, unless revoked by the newly
elected President within ninety days from his assumption of office.

Section 278. Special election to fill existing vacancies in the Batasang Pambansa. - The election of
Members to fill existing vacancies in the Batasang Pambansa shall be held simultaneously with the next
local election in 1986 or in the next special national election for President and Vice-President if one is
held earlier.

Section 279. Elective officials in existing sub-provinces. - The election of elective public officials in
existing sub-provinces shall likewise be held simultaneously with the next local elections of 1986 and
1990 in accordance with their respective charters, subject to the same term, qualifications, manner of
election and resolution of election controversies as are herein provided for comparable provincial elective
officials.

ARTICLE XXV
FINAL PROVISIONS

Section 280. Reorganization of the Commission on Elections. - In order to promote maximum efficiency
in carrying out its constitutional duty to insure free, orderly and honest elections and in discharging its
judicial powers and functions under the Constitution, the Commission is hereby authorized to reorganize

101
its office within twelve months after the first election to be held under this Code. It may create, merge, or
abolish departments, offices, divisions or units, redistribute functions and reassign personnel, change
designations of existing positions subject to pertinent existing laws and regulations. It may recommend
the levels and rates of salaries of its subordinate officials and employees subject to the laws and
regulations on civil service and compensation, position classification and standardization of salaries:
Provided, That no permanent official or employee already in the service of the Commission, upon
approval of this Code, shall be laid off, or demoted in rank or salary.

Section 281. Separability clause. - If for any reason any section or provision of this Code, or any portion
thereof, or the application of such section, provision or portion to any person, group or circumstance is
declared invalid or unconstitutional, the remainder of this Code or the application of such section,
provision or portion thereof to other persons, groups or circumstances shall not be affected by such
declaration.

Section 282. Repealing clause. - Presidential Decree No. 1296, otherwise known as The 1978 Election
Code, as amended, is hereby repealed. All other election laws, decrees, executive orders, rules and
regulations, or parts thereof, inconsistent with the provisions of this Code are hereby repealed, except
Presidential Decree No. 1618 and Batas Pambansa Blg. 20 governing the election of the members of the
Sangguniang Pampook of Regions IX and XII.

Section 283. Effectivity. - This Code shall take effect upon its approval.

Approved, December 3, 1985.

102
R.A. 8436 Automated Election Law
AN ACT AUTHORIZING THE COMMISSION ON ELECTIONS TO USE AN AUTOMATED
ELECTION SYSTEM IN THE MAY 11, 1998 NATIONAL OR LOCAL ELECTIONS AND IN
SUBSEQUENT NATIONAL AND LOCAL ELECTORAL EXERCISES, PROVIDING FUNDS
THEREFOR AND FOR OTHER PURPOSES.

Section 1. Declaration of policy. - It is the policy of the State to ensure free, orderly, honest, peaceful
and credible elections, and assure the secrecy and sanctity of the ballot in order that the results of
elections, plebiscites, referenda, and other electoral exercises shall be fast, accurate and reflective of the
genuine will of the people.

Section 2. Definition of terms. - As used in this Act, the following terms shall mean:

1. Automated election system - a system using appropriate technology for voting and electronic
devices to count votes and canvass/consolidate results;

2. Counting machine - a machine that uses an optical scanning/mark-sense reading device or any
similar advanced technology to count ballots;

3. Data storage device - a device used to electronically store counting and canvassing results, such
as a memory pack or diskette;

4. Computer set - a set of equipment containing regular components, i.e., monitor, central
processing unit or CPU, keyboard and printer;

5. National ballot - refers to the ballot to be used in the automated election system for the purpose of
the May 11, 1998 elections. This shall contain the names of the candidates for president, vice-
president, senators and parties, organizations or coalitions participating under the party-list
system.

This ballot shall be counted by the counting machine;

6. Local Ballot - refers to the ballot on which the voter will manually write the names of the
candidates of his/her choice for member of the House of Representatives, governor, vice-
governor, members of the provincial board, mayor, vice-mayor, and members of the
city/municipal council. For the purpose of the May 11, 1998 elections, this ballot will be counted
manually;

7. Board of Election Inspectors - there shall be a Board of Election Inspectors in every precinct
composed of three (3) regular members who shall conduct the voting, counting and recording of
votes in the polling place.

103
 For the purpose of the May 11, 1998 elections, there shall be special members composed of a
fourth member in each precinct and a COMELEC representative who is authorized to operate the
counting machine. Both shall conduct the counting and recording of votes of the national ballots
in the designated counting centers;

8. Election returns - a machine-generated document showing the date of the election, the province,
municipality and the precinct in which it is held and the votes in figures for each candidate in a
precinct directly produced by the counting machine;

9. Statement of votes - a machine-generated document containing the votes obtained by candidates

in each precinct in a city/municipality;

10. City/municipal/district/provincial certificate of canvass of votes - a machine-generated document

containing the total votes in figures obtained by each candidate in a city/municipality/district/
province as the case may be; and

11. Counting center - a public place designated by the Commission where counting of votes and
canvassing/consolidation of results shall be conducted.

Section 3. Qualifications, rights and limitations of the special members of the Board of Election
Inspectors. - No person shall be appointed as a special member of the board of election inspectors unless
he/she is of good moral character and irreproachable reputation, a registered voter, has never been
convicted of any election offense or of any crime punishable by more than six (6) months imprisonment
or if he/she has pending against him/her an information for any election offense or if he/she is related
within the fourth civil degree of consanguinity or affinity to any member of the board of election
inspectors or any special member of the same board of Election Inspector or to any candidate for a
national position or to a nominee as a party list representative or his/her spouse. The special members of
the board shall enjoy the same rights and be bound by the same limitations and liabilities of a regular
member of the board of election inspectors but shall not vote during the proceedings of the board of
election inspectors except on matters pertaining to the national ballot.

Section 4. Duties and functions of the special members of the Board of Election Inspectors. -

1. During the conduct of the voting in the polling place, the fourth member shall:

a. accomplish the minutes of voting for the automated election system in the precinct; and

b. ensure that the national ballots are placed inside the appropriate ballot box;

2. On the close of the polls, the fourth member shall bring the ballot box containing the national
ballots to the designated counting center;

104
 3. Before the counting of votes, the fourth member shall verify if the number of national ballots
tallies with the data in the minutes of the voting;

4. During the counting of votes, the fourth member and the COMELEC authorized representative
shall jointly accomplish the minutes of counting for the automated election system in the precinct;

5. After the counting of votes, the fourth member and the COMELEC authorized representative
shall jointly:

a. certify the results of the counting of national ballots from the precinct; and

b. bring the ballot box containing the counted national ballots together with the minutes of
voting and counting, and other election documents and paraphernalia to the city or
municipal treasurer for safekeeping.

Sec. 5. Board of Canvassers. - For purposes of the May 11, 1998 elections, each province, city or
municipality shall have two (2) board of canvassers, one for the manual election system under the existing
law, and the other, for the automated system. For the automated election system, the chairman of the
board shall be appointed by the Commission from among its personnel/deputies and the members from
the officials enumerated in Section 21 of Republic Act No. 6646.

Sec. 6. Authority to use an automated election system. - To carry out the above-stated policy, the
Commission on Elections, herein referred to as the Commission, is hereby authorized to use an automated
election system, herein referred to as the System, for the process of voting, counting of votes and
canvassing/consolidation of results of the national and local elections: Provided, however, That for the
May 11, 1998 elections, the System shall be applicable in all areas within the country only for the
positions of president, vice-president, senators and parties, organizations or coalitions participating under
the party-list system.

To achieve the purpose of this Act, the Commission is authorized to procure by purchase, lease or
otherwise any supplies, equipment, materials and services needed for the holding of the elections by an
expedited process of public bidding of vendors, suppliers or lessors: Provided, That the accredited
political parties are duly notified of and allowed to observe but not to participate in the bidding. If, inspite
of its diligent efforts to implement this mandate in the exercise of this authority, it becomes evident by
February 9, 1998 that the Commission cannot fully implement the automated election system for national
positions in the May 11, 1998 elections, the elections for both national and local positions shall be done
manually except in the Autonomous Region in Muslim Mindanao (ARMM) where the automated election
system shall be used for all positions.

105
Sec. 7. Features of the system. - The System shall utilize appropriate technology for voting, and
electronic devices for counting of votes and canvassing of results. For this purpose, the Commission shall
acquire automated counting machines, computer equipment, devices and materials and adopt new forms
and printing materials.

The System shall contain the following features:

a. use of appropriate ballots,

b. stand-alone machine which can count votes and an automated system which can consolidate the
results immediately,

c. with provisions for audit trails,

d. minimum human intervention, and

e. adequate safeguard/security measures.

In addition, the System shall as far as practicable have the following features:

1. It must be user-friendly and need not require computer-literate operators;

2. The machine security must be built-in and multi-layer existent on hardware and software with
minimum human intervention using latest technology like encrypted coding system;

3. The security key control must be embedded inside the machine sealed against human
intervention;

4. The Optical Mark Reader (OMR) must have a built-in printer for numbering the counted ballots
and also for printing the individual precinct number on the counted ballots;

5. The ballot paper for the OMR counting machine must be of the quality that passed the
international standard like ISO-1831, JIS-X- 9004 or its equivalent for optical character
recognition;

6. The ballot feeder must be automatic;

7. The machine must be able to count from 100 to 150 ballots per minute;

8. The counting machine must be able to detect fake or counterfeit ballots and must have a fake
ballot rejector;

106
 9. The counting machine must be able to detect and reject previously counted ballots to prevent
duplication;

10. The counting machine must have the capability to recognize the ballot's individual precinct and
city or municipality before counting or consolidating the votes;

11. The System must have a printer that has the capacity to print in one stroke or operation seven (7)
copies (original plus six (6) copies) of the consolidated reports on carbonless paper;

12. The printer must have at least 128 kilobytes of Random Access Memory (RAM) to facilitate the
expeditious processing of the printing of the consolidated reports;

13. The machine must have a built-in floppy disk drive in order to save the processed data on a
diskette;

14. The machine must also have a built-in hard disk to store the counted and consolidated data for
future printout and verification;

15. The machine must be temperature-resistant and rust-proof;

16. The optical lens of the OMR must have a self-cleaning device;

17. The machine must not be capable of being connected to external computer peripherals for the
process of vote consolidation;

18. The machine must have an Uninterrupted Power Supply (UPS);

19. The machine must be accompanied with operating manuals that will guide the personnel of the
Commission the proper use and maintenance of the machine;

20. It must be so designed and built that add-ons may immediately be incorporated into the System at
minimum expense;

21. It must provide the shortest time needed to complete the counting of votes and canvassing of the
results of the election;

22. The machine must be able to generate consolidated reports like the election return, statement of
votes and certificate of canvass at different levels; and

23. The accuracy of the count must be guaranteed, the margin of error must be disclosed and backed
by warranty under such terms and conditions as may be determined by the Commission.

In the procurement of this system, the Commission shall adopt an equitable system of deductions or
demerits for deviations or deficiencies in meeting all the above stated features and standards

107
For this purpose, the Commission shall create an Advisory Council to be composed of technical experts
from the Department of Science and Technology (DOST), the Information Technology Foundation of the
Philippines (ITFP), the University of the Philippines (UP), and two (2) representatives from the private
sector recommended by the Philippine Computer Society (PCS).

The Council may avail itself of the expertise and services of resource persons of known competence and
probity.

The Commission in collaboration with the DOST shall establish an independent Technical Ad Hoc
Evaluation Committee, herein known as the Committee, composed of a representative each from the
Senate, House of Representatives, DOST and COMELEC. The Committee shall certify that the System is
operating properly and accurately and that the machines have a demonstrable capacity to distinguish
between genuine and spurious ballots.

The Committee shall ensure that the testing procedure shall be unbiased and effective in checking the
worthiness of the System. Toward this end, the Committee shall design and implement a reliability test
procedure or a system stress test.

Sec. 8. Procurement of equipment and materials. - The Commission shall procure the automated
counting machines, computer equipment, devices and materials needed for ballot printing and devices for
voting, counting and canvassing from local or foreign sources free from taxes and import duties, subject
to accounting and auditing rules and regulations.

Sec. 9. Systems breakdown in the counting center. - In the event of a systems breakdown of all
assigned machines in the counting center, the Commission shall use any available machine or any
component thereof from another city/municipality upon the approval of the Commission en banc or any
of its divisions.

The transfer of such machines or any component thereof shall be undertaken in the presence of
representatives of political parties and citizens' arm of the Commission who shall be notified by the
election officer of such transfer.

There is a systems breakdown in the counting center when the machine fails to read the ballots or fails to
store/save results or fails to print the results after it has read the ballots; or when the computer fails to
consolidate election results/reports or fails to print election results/reports after consolidation.

108
Sec. 10. Examination and testing of counting machines. - The Commission shall, on the date and time
it shall set and with proper notices, allow the political parties and candidates or their representatives,
citizens' arm or their representatives to examine and test the machines to ascertain that the system is
operating properly and accurately. Test ballots and test forms shall be provided by the Commission.

After the examination and testing, the machines shall be locked and sealed by the election officer or any
authorized representative of the Commission in the presence of the political parties and candidates or their
representatives, and accredited citizens' arms. The machines shall be kept locked and sealed and shall be
opened again on election day before the counting of votes begins.

Immediately after the examination and testing of the machines, the parties and candidates or their
representatives, citizens' arms or their representatives, may submit a written report to the election officer
who shall immediately transmit it to the Commission for appropriate action.

Sec. 11. Official ballot. - The Commission shall prescribe the size and form of the official ballot which
shall contain the titles of the positions to be filled and/or the propositions to be voted upon in an initiative,
referendum or plebiscite. Under each position, the names of candidates shall be arranged alphabetically
by surname and uniformly printed using the same type size. A fixed space where the chairman of the
Board of Election inspectors shall affix his/her signature to authenticate the official ballot shall be
provided.

Both sides of the ballots may be used when necessary.

For this purpose, the deadline for the filing of certificate of candidacy/petition for
registration/manifestation to participate in the election shall not be later than one hundred twenty (120)
days before the elections: Provided, That, any elective official, whether national or local, running for any
office other than the one which he/she is holding in a permanent capacity, except for president and vice-
president, shall be deemed resigned only upon the start of the campaign period corresponding to the
position for which he/she is running: Provided, further, That, unlawful acts or omissions applicable to a
candidate shall take effect upon the start of the aforesaid campaign period: Provided, finally, That, for
purposes of the May 11, 1998 elections, the deadline for filing of the certificate of candidacy for the
positions of President, Vice President, Senators and candidates under the Party-List System as well as
petitions for registration and/or manifestation to participate in the Party-List System shall be on February
9, 1998 while the deadline for the filing of certificate of candidacy for other positions shall be on March
27, 1998.

109
The official ballots shall be printed by the National Printing Office and/or the Bangko Sentral ng Pilipinas
at the price comparable with that of private printers under proper security measures which the
Commission shall adopt. The Commission may contract the services of private printers upon certification
by the National Printing Office/Bangko Sentral ng Pilipinas that it cannot meet the printing requirements.
Accredited political parties and deputized citizens' arms of the Commission may assign watchers in the
printing, storage and distribution of official ballots.

To prevent the use of fake ballots, the Commission through the Committee shall ensure that the serial
number on the ballot stub shall be printed in magnetic ink that shall be easily detectable by inexpensive
hardware and shall be impossible to reproduce on a photocopying machine, and that identification marks,
magnetic strips, bar codes and other technical and security markings, are provided on the ballot.

The official ballots shall be printed and distributed to each city/municipality at the rate of one (1) ballot
for every registered voter with a provision of additional four (4) ballots per precinct.

Sec. 12. Substitution of candidates. - In case of valid substitutions after the official ballots have been
printed, the votes cast for the substituted candidates shall be considered votes for the substitutes.

Sec. 13. Ballot box. - There shall be in each precinct on election day a ballot box with such safety
features that the Commission may prescribe and of such size as to accommodate the official ballots
without folding them.

For the purpose of the May 11, 1998 elections, there shall be two (2) ballot boxes for each precinct, one
(1) for the national ballots and one (I) for the local ballots.

Sec. 14. Procedure in voting. - The voter shall be given a ballot by the chairman of the Board of Election
Inspectors. The voter shall then proceed to a voting booth to accomplish his/her ballot.

If a voter spoils his/her ballot, he/she may be issued another ballot subject to Section 11 of this Act. No
voter may be allowed to change his/her ballot more than once.

After the voter has voted, he/she shall affix his/her thumbmark on the corresponding space in the voting
record. The chairman shall apply indelible ink on the voter's right forefinger and affix his/her signature in
the space provided for such purpose in the ballot. The voter shall then personally drop his/her ballot on
the ballot box.

110
For the purpose of the May 11, 1998 elections, each voter shall be given one (1) national and one (1) local
ballot by the Chairperson. The voter shall, after casting his/her vote, personally drop the ballots in their
respective ballot boxes.

Sec. 15. Closing of polls. - After the close of voting, the board shall enter in the minutes the number of
registered voters who actually voted, the number and serial number of unused and spoiled ballots, the
serial number of the self-locking metal seal to be used in sealing the ballot box. The board shall then place
the minutes inside the ballot box and thereafter close, lock and seal the same with padlocks, self-locking
metal seals or any other safety devices that the Commission may authorize. The chairman of the Board of
Election Inspectors shall publicly announce that the votes shall be counted at a designated counting center
where the board shall transport the ballot box containing the ballots and other election documents and
paraphernalia.

For the purpose of the May 11, 1998 elections, the chairman of the Board of Election Inspectors shall
publicly announce that the votes for president, vice-president, senators and parties, organizations or
coalitions participating in the party-list system shall be counted at a designated counting center. During
the transport of the ballot box containing the national ballots and other documents, the fourth member of
the board shall be escorted by representatives from the Armed Forces of the Philippines or from the
Philippine National Police, citizens' arm, and if available, representatives of political parties and
candidates.

Sec. 16. Designation of Counting Centers. - The Commission shall designate counting center(s) which
shall be a public place within the city/municipality or in such other places as may be designated by the
Commission when peace and order conditions so require, where the official ballots cast in various
precincts of the city/municipality shall be counted. The election officer shall post prominently in his/her
office, in the bulletin boards at the city/municipal hall and in three (3) other conspicuous places in the
city/municipality, the notice on the designated counting center(s) for at least fifteen (15) days prior to
election day.

For the purpose of the May 11, 1998 elections, the Commission shall designate a central counting
center(s) which shall be a public place within the city or municipality, as in the case of the National
Capital Region and in highly urbanized areas. The Commission may designate other counting center(s)
where the national ballots cast from various precincts of different municipalities shall be counted using
the automated system. The Commission shall post prominently a notice thereof, for at least fifteen (15)
days prior to election day, in the office of the election officer, on the bulletin boards at the municipal hall
and in three (3) other conspicuous places in the municipality.

111
Sec. 17. Counting procedure. -

a. The counting of votes shall be public and conducted in the designated counting center(s).

b. The ballots shall be counted by the machine by precinct in the order of their arrival at the
counting center. The election officer or his/her representative shall log the sequence of arrival of
the ballot boxes and indicate their condition. Thereafter, the board shall, in the presence of the
watchers and representatives of accredited citizens' arm, political parties/candidates, open the
ballot box, retrieve the ballots and minutes of voting. It shall verify whether the number of ballots
tallies with the data in the minutes. If there are excess ballots, the poll clerk, without looking at
the ballots, shall publicly draw out at random ballots equal to the excess and without looking at
the contents thereof, place them in an envelope which shall be marked "excess ballots". The
envelope shall be sealed and signed by the members of the board and placed in the compartment
for spoiled ballots.

c. The election officer or any authorized official or any member of the board shall feed the valid
ballots into the machine without interruption until all the ballots for the precincts are counted.

d. The board shall remain at the counting center until all the official ballots for the precinct are
counted and all reports are properly accomplished.

For the purpose of the May 11, 1998 elections, the ballots shall be counted by precinct by the special
members of the board in the manner provided in paragraph (b) hereof.

Sec. 18. Election returns. - After the ballots of the precincts have been counted, the election officer or
any official authorized by the Commission shall, in the presence of watchers and representatives of the
accredited citizens' arm, political parties/ candidates, if any, store the results in a data storage device and
print copies of the election returns of each precinct. The printed election returns shall be signed and
thumbmarked by the fourth member and COMELEC authorized representative and attested to by the
election officer or authorized representative. The Chairman of the Board shall then publicly read and
announce the total number of votes obtained by each candidate based on the election returns.

Thereafter, the copies of the election returns shall be sealed and placed in the proper envelopes for
distribution as follows:

A. In the election of president, vice-president, senators and party-list system:

1. The first copy shall be delivered to the city or municipal board of canvassers;

2. The second copy, to the Congress, directed to the President of the Senate;

3. The third copy, to the Commission;

112
 4. The fourth copy, to the citizens' arm authorized by the Commission to conduct an
unofficial count. In the conduct of the unofficial quick count by any accredited citizens'
arm, the Commission shall promulgate rules and regulations to ensure, among others, that
said citizens' arm releases in the order of their arrival one hundred percent (100%) results
of a precinct indicating the precinct, municipality or city, province and region: Provided,
however, that, the count shall continue until all precincts shall have been reported

5. The fifth copy, to the dominant majority party as determined by the Commission in
accordance with law;

6. The sixth copy, to the dominant minority party as determined by the Commission in
accordance with law; and

7. The seventh copy shall be deposited inside the compartment of the ballot box for valid
ballots.

The citizens' arm shall provide copies of the election returns at the expense of the requesting
party.

For the purpose of the May 11, 1998 elections, after the national ballots have been counted, the
COMELEC authorized representative shall implement the provisions of paragraph A hereof.

B. In the election of local officials and members of the House of Representatives:

1. The first copy shall be delivered to the city or municipal board of canvassers;

2. The second copy, to the Commission;

3. The third copy, to the provincial board of canvassers;

4. The fourth copy, to the citizens' arm authorized by the Commission to conduct an
unofficial count. In the conduct of the unofficial quick count by any accredited citizens'
arm, the Commission shall promulgate rules and regulations to ensure, among others, that
said citizens' arm releases in the order of their arrival one hundred percent (100%) results
of a precinct indicating the precinct, municipality or city, province and region: Provided,
however, That, the count shall continue until all precincts shall have been reported.

5. The fifth copy, to the dominant majority party as determined by the Commission in
accordance with law;

6. The sixth copy, to the dominant minority party as determined by the Commission in
accordance with law; and

113
 7. The seventh copy shall be deposited inside the compartment of the ballot box for valid
ballots.

The citizens' arm shall provide copies of election returns at the expense of the requesting party.

After the votes from all precincts have been counted, a consolidated report of votes for each candidate
shall be printed.

After the printing of the election returns, the ballots shall be returned to the ballot box, which shall be
locked, sealed and delivered to the city/municipal treasurer for safekeeping. The treasurer shall
immediately provide the Commission and the election officer with a record of the serial numbers of the
ballot boxes and the corresponding metal seals.

Sec. 19. Custody and accountability of ballots. - The election officer and the treasurer of the
city/municipality as deputy of the Commission shall have joint custody and accountability of the official
ballots, accountable forms and other election documents as well as ballot boxes containing the official
ballots cast. The ballot boxes shall not be opened for three (3) months unless the Commission orders
otherwise.

Sec. 20. Substitution of Chairman and Members of the Board of Canvassers. - In case of non-
availability, absence, disqualification due to relationship, or incapacity for any cause of the chairman, the
Commission shall appoint as substitute, a ranking lawyer of the Commission. With respect to the other
members of the board, the Commission shall appoint as substitute the following in the order named: the
provincial auditor, the register of deeds, the clerk of court nominated by the executive judge of the
regional trial court, or any other available appointive provincial official in the case of the provincial board
of canvassers; the officials in the city corresponding to those enumerated in the case of the city board of
canvassers; and the municipal administrator, the municipal assessor, the clerk of court nominated by the
judge of the municipal trial court, in the case of the municipal board of canvassers.

Sec. 21. Canvassing by Provincial, City, District and Municipal Boards of Canvassers. - The city or
municipal board of canvassers shall canvass the votes for the president, vice-president, senators, and
parties, organizations or coalitions participating under the party-list system by consolidating the results
contained in the data storage devices used in the printing of the election returns. Upon completion of the
canvass, it shall print the certificate of canvass of votes for president, vice-president, senators and
members of the House of Representatives and elective provincial officials and thereafter, proclaim the
elected city or municipal officials, as the case may be.

114
The city board of canvassers of cities comprising one (1) or more legislative districts shall canvass the
votes for president, vice-president, senators, members of the House of Representatives and elective city
officials by consolidating the results contained in the data storage devices used in the printing of the
election returns. Upon completion of the canvass, the board shall print the canvass of votes for president,
vice-president, and senators and thereafter, proclaim the elected members of the House of Representatives
and city officials.

In the Metro Manila area, each municipality comprising a legislative district shall have a district board of
canvassers which shall canvass the votes for president, vice-president, senators, members of the House of
Representatives and elective municipal officials by consolidating the results contained in the data storage
devices used in the printing of the election returns. Upon completion of the canvass, it shall print the
certificate of canvass of votes for president, vice-president, and senators and thereafter, proclaim the
elected members of the House of Representatives and municipal officials.

Each component municipality in a legislative district in the Metro Manila area shall have a municipal
board of canvassers which shall canvass the votes for president, vice-president, senators, members of the
House of Representatives and elective municipal officials by consolidating the results contained in the
data storage devices used in the printing of the election returns. Upon completion of the canvass, it shall
prepare the certificate of canvass of votes for president, vice-president, senators, members of the House of
Representatives and thereafter, proclaim the elected municipal officials.

The district board of canvassers of each legislative district comprising two (2) municipalities in the Metro
Manila area shall canvass the votes for president, vice-president, senators and members of the House of
Representatives by consolidating the results contained in the data storage devices submitted by the
municipal board of canvassers of the component municipalities. Upon completion of the canvass, it shall
print a certificate of canvass of votes for president, vice-president and senators and thereafter, proclaim
the elected members of the House of Representatives in the legislative district.

The district/provincial board of canvassers shall canvass the votes for president, vice-president, senators,
members of the House of Representatives and elective provincial officials by consolidating the results
contained in the data storage devices submitted by the board of canvassers of the municipalities and
component cities. Upon completion of the canvass, it shall print the certificate of canvass of votes for
president, vice-president and senators and thereafter, proclaim the elected members of the House of
Representatives and the provincial officials.

115
The municipal, city, district and provincial certificates of canvass of votes shall each be supported by a
statement of votes.

The Commission shall adopt adequate and effective measures to preserve the integrity of the data storage
devices at the various levels of the boards of canvassers.

Sec. 22. Number of copies of Certificates of Canvass of Votes and their distribution. -

a. The certificate of canvass of votes for president, vice-president, senators, members of the House
of Representatives, parties, organizations or coalitions participating under the party-list system
and elective provincial officials shall be printed by the city or municipal board of canvassers and
distributed as follows:

1. The first copy shall be delivered to the provincial board of canvassers for use in the
canvass of election results for president, vice-president, senators, members of the House
of Representatives, parties, organizations or coalitions participating under the party-list
system and elective provincial officials;

2. The second copy shall be sent to the Commission;

3. The third copy shall be kept by the chairman of the board; and

4. The fourth copy shall be given to the citizens' arm designated by the Commission to
conduct an unofficial count. It shall be the duty of the citizens' arm to furnish
independent candidates copies of the certificate of canvass at the expense of the
requesting party.

The board of canvassers shall furnish all registered parties copies of the certificate of canvass at
the expense of the requesting party.

b. The certificate of canvass of votes for president, vice-president and senators, parties,
organizations or coalitions participating under the party-list system shall be printed by the city
boards of canvassers of cities comprising one or more legislative districts, by provincial boards of
canvassers and by district boards of canvassers in the Metro Manila area, and other highly
urbanized areas and distributed as follows:

1. The first copy shall be sent to Congress, directed to the President of the Senate for use in
the canvas of election results for president and vice-president;

2. The second copy shall be sent to the Commission for use in the canvass of the election
results for senators;

3. The third copy shall be kept by the chairman of the board; and

116
 4. The fourth copy shall be given to the citizens' arm designated by the Commission to
conduct an unofficial count. It shall be the duty of the citizens' arm to furnish
independent candidates copies of the certificate of canvass at the expense of the
requesting party.

The board of canvassers shall furnish all registered parties copies of the certificate of canvass at
the expense of the requesting party.

c. The certificates of canvass printed by the provincial, district, city or municipal boards of
canvassers shall be signed and thumbmarked by the chairman and members of the board and the
principal watchers, if available. Thereafter, it shall be sealed and placed inside an envelope which
shall likewise be properly sealed.

In all instances, where the Board of Canvassers has the duty to furnish registered political parties with
copies of the certificate of canvass, the pertinent election returns shall be attached thereto, where
appropriate.

Sec. 23. National Board of Canvassers for Senators. - The chairman and members of the Commission
on Elections sitting en banc, shall compose the national board of canvassers for senators. It shall canvass
the results for senators by consolidating the results contained in the data storage devices submitted by the
district, provincial and city boards of canvassers of those cities which comprise one or more legislative
districts. Thereafter, the national board shall proclaim the winning candidates for senators.

Sec. 24. Congress as the National Board of Canvassers for President and Vice-President. - The
Senate and the House of Representatives in joint public session shall compose the national board of
canvassers for president and vice-president. The returns of every election for president and vice-president
duly certified by the board of canvassers of each province or city, shall be transmitted to the Congress,
directed to the president of the Senate. Upon receipt of the certificates of canvass, the president of the
Senate shall, not later than thirty (30) days after the day of the election, open all the certificates in the
presence of the Senate and the House of Representatives in joint public session and the Congress upon
determination of the authenticity and the due execution thereof in the manner provided by law, canvass all
the results for president and vice-president by consolidating the results contained in the data storage
devices submitted by the district, provincial and city boards of canvassers and thereafter, proclaim the
winning candidates for president and vice-president.

Section 25. Voters' education. - The Commission together with and in support of accredited citizens'
arms shall carry out a continuing and systematic campaign through newspapers of general circulation,
radio and other media forms, as well as through seminars, symposia, fora and other non-traditional means

117
to educate the public and fully inform the electorate about the automated election system and inculcate
values on honest, peaceful and orderly elections.

Sec. 26. Supervision and control. - The System shall be under the exclusive supervision and control of
the Commission. For this purpose, there is hereby created an information technology department in the
Commission to carry out the full administration and implementation of the System.

The Commission shall take immediate steps as may be necessary for the acquisition, installation,
administration, storage, and maintenance of equipment and devices, and to promulgate the necessary rules
and regulations for the effective implementation of this Act.

Sec. 27. Oversight Committee. - An Oversight Committee is hereby created composed of three (3)
representatives each from the Senate and the House of Representatives and three (3) from the
Commission on Elections to monitor and evaluate the implementation of this Act. A report to the Senate
and the House of Representatives shall be submitted within ninety (90) days from the date of election.

The oversight committee may hire competent consultants for project monitoring and information
technology concerns related to the implementation and improvement of the modern election system. The
oversight committee shall be provided with the necessary funds to carry out its duties.

Sec. 28. Designation of other dates for certain pre-election acts. - If it shall no longer be reasonably
possible to observe the periods and dates prescribed by law for certain pre-election acts, the Commission
shall fix other periods and dates in order to ensure accomplishment of the activities so voters shall not be
deprived of their suffrage.

Sec. 29. Election offenses. - In addition to those enumerated in Sections 261 and 262 of Batas Pambansa
Blg. 881, as amended, the following acts shall be penalized as election offenses, whether or not said acts
affect the electoral process or results:

a. Utilizing without authorization, tampering with, destroying or stealing:

1. Official ballots, election returns, and certificates of canvass of votes used in the System;
and

2. Electronic devices or their components, peripherals or supplies used in the System such
as counting machine, memory pack/diskette, memory pack receiver and computer set;

118
 b. Interfering with, impeding, absconding for purpose of gain, preventing the installation or use of
computer counting devices and the processing, storage, generation and transmission of election
results, data or information; and

c. Gaining or causing access to using, altering, destroying or disclosing any computer data,
program, system software, network, or any computer-related devices, facilities, hardware or
equipment, whether classified or declassified.

Sec. 30. Applicability. - The provisions of Batas Pambansa Blg. 881, as amended, otherwise known as
the "Omnibus Election Code of the Philippines", and other election laws not inconsistent with this Act
shall apply.

Sec. 31. Rules and Regulations. - The Commission shall promulgate rules and regulations for the
implementation and enforcement of this Act including such measures that will address possible
difficulties and confusions brought about by the two-ballot system. The Commission may consult its
accredited citizens' arm for this purpose.

Sec. 32. Appropriations. - The amount necessary to carry out the provisions of this Act shall be charged
against the current year's appropriations of the Commission. Thereafter, such sums as may be necessary
for the continuous implementation of this Act shall be included in the annual General Appropriations Act.

In case of deficiency in the funding requirements herein provided, such amount as may be necessary shall
be augmented from the current contingent fund in the General Appropriations Act.

Sec. 33. Separability clause. - If, for any reason, any section or provision of this Act or any part thereof,
or the application of such section, provision or portion is declared invalid or unconstitutional, the
remainder thereof shall not be affected by such declaration.

Sec. 34. Repealing clause. - All laws, presidential decrees, executive orders, rules and regulations or
parts thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

Sec. 35. Effectivity. - This Act shall take effect fifteen (15) days after its publication in a newspaper of
general circulation.

Approved: December 22, 1997

119
120
R.A. 9369
AN ACT AMENDING REPUBLIC ACT NO. 8436, ENTITLED "AN ACT AUTHORIZING THE
COMMISSION ON ELECTIONS TO USE AN AUTOMATED ELECTION SYSTEM IN THE MAY
11, 1998 NATIONAL OR LOCAL ELECTIONS AND IN SUBSEQUENT NATIONAL AND LOCAL
ELECTORAL EXERCISES, TO ENCOURAGE TRANSPARENCY, CREDIBILITY, FAIRNESS AND
ACCURACY OF ELECTIONS, AMENDING FOR THE PURPOSE BATAS PAMBANSA BLG. 881,
AS AMENDED, REPUBLIC ACT NO. 7166 AND OTHER RELATED ELECTION LAWS,
PROVIDING FUNDS THEREFOR AND FOR OTHER PURPOSES"

SECTION 1. Section 1 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 1. Declaration of Policy. - It is the policy of the State to ensure free, orderly, honest, peaceful,
credible and informed elections, plebiscites, referenda, recall and other similar electoral exercises by
improving on the election process and adopting systems, which shall involve the use of an automated
election system that will ensure the secrecy and sanctity of the ballot and all election, consolidation and
transmission documents in order that the process shall be transparent and credible and that the results shall
be fast, accurate and reflective of the genuine will of the people.

"The State recognizes the mandate and authority of the Commission to prescribe the adoption and use of
the most suitable technology of demonstrated capability taking into account the situation prevailing in the
area and the funds available for the purpose."

SECTION 2. Section 2 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 2. Definition of Terms. - As used in this Act, the following terms shall mean:

"1. Automated election system, hereinafter referred to as AES - a system using appropriate technology
which has been demonstrated in the voting, counting, consolidating, canvassing, and transmission of
election results, and other electoral processes;

"2. Electronic transmission - conveying data in electronic form from one location to another;

"3. Official ballot - where AES is utilized, refers to the paper ballot, whether printed or generated by the
technology applied, that faithfully captures or represents the votes cast by a voter recorded or to be recorded
in electronic form;

"4. Election returns - a document in electronic and printed form directly produced by the counting or
voting machine, showing the date of the election, the province, municipality and the precinct in which it is
held and the votes in figures for each candidate in a precinct in areas where AES is utilized;

121
"5. Statement of votes - a document containing the votes obtained by candidates in each precinct in a
city/municipality;

"6. City/municipal/district/provincial certificate of canvass - a document in electronic and printed form

containing the total votes in figures obtained by each candidate in a city/municipality/district/province as
the case may be. The electronic certificates of canvass shall be the official canvass results in the
aforementioned jurisdictions;

"7. Paper-based election system - a type of automated election system that uses paper ballots, records and
counts votes, tabulates, consolidates/canvasses and transmits electronically the results of the vote count;"

"8. Direct recording electronic election system - a type of automated election system that uses electronic
ballots, records votes by means of a ballot display provided with mechanical or electro-optical components
that can be activated by the voter, processes data by means of a computer program, records voting data and
ballot images, and transmits voting results electronically;

"9. Counting center - a public place within the city/municipality or in such other places as may be
designated by the Commission where the official ballots cast in various precincts of the city/municipality
shall be counted. Polling places or voting centers may also be designated as counting centers;

"10. Continuity plan - a list of contingency measures, and the policies for activation of such, that are put
in place to ensure continuous operation of the AES;

"11. Disabled voters - a person with impaired capacity to use the AES;

"12. Source code - human readable instructions that define what the computer equipment will do; and

"13. Station - refers to a polling place, counting center, municipal or provincial canvassing center."

SECTION 3. Section 3 of Republic Act No. 8436 is hereby amended to read as follows:

"SEC 3. Board of Election Inspectors. - Where AES shall be adopted, at least one member of the Board
of Election Inspectors shall be an information technology-capable person, who is trained or certified by the
DOST to use the AES. Such certification shall be issued by the DOST, free of charge."

SECTION 4. Section 4 of Republic Act No. 8436 is hereby deleted. The succeeding sections are hereby
renumbered accordingly.

122
SECTION 5. Section 5 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 4. Information Technology Support for the Board of Canvassers. - To implement the AES,
each board of canvassers shall be assisted by an information technology-capable person authorized to
operate the equipment adopted for the elections. The Commission shall deputize information technology
personnel from among the agencies and instrumentalities of the government, including government-owned
and controlled corporations. The per diem of the deputized personnel shall be the same as that of the
members of the board of canvassers."

SECTION 6. Section 6 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 5. Authority to Use an Automated Election System. - To carry out the above-stated policy,
the Commission on Elections, herein referred to as the Commission, is hereby authorized to use an
automated election system or systems in the same election in different provinces, whether paper-based or a
direct recording electronic election system as it may deem appropriate and practical for the process of
voting, counting of votes and canvassing/consolidation and transmittal of results of electoral exercises:
Provided, That for the regular national and local elections, which shall be held immediately after effectivity
of this Act, the AES shall be used in at least two highly urbanized cities and two provinces each in Luzon,
Visayas and Mindanao, to be chosen by the Commission: Provided, further, That local government units
whose officials have been the subject of administrative charges within sixteen (16) months prior to the May
14, 2007 elections shall not be chosen: Provided finally, That no area shall be chosen without the consent
of the Sanggunian of the local government unit concerned. The term local government unit as used in this
provision shall refer to a highly urbanized city or province. In succeeding regular national or local elections,
the AES shall be implemented nationwide."

SECTION 7. Section 7 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 6. Minimum System Capabilities. - "The automated election system must at least have the
following functional capabilities

(a) Adequate security against unauthorized access;

(b) Accuracy in recording and reading of votes as well as in the tabulation, consolidation/canvassing,
electronic transmission, and storage of results;

(c) Error recovery in case of non-catastrophic failure of device;

123
(d) System integrity which ensures physical stability and functioning of the vote recording and counting
process;

(e) Provision for voter verified paper audit trail;

(f) System auditability which provides supporting documentation for verifying the correctness of reported
election results;

(g) An election management system for preparing ballots and programs for use in the casting and counting
of votes and to consolidate, report and display election results in the shortest time possible;

(h) Accessibility to illiterates and disabled voters;

(i) Vote tabulating program for election, referendum or plebiscite;

(j) Accurate ballot counters;

(k) Data retention provision;

(l) Provide for the safekeeping, storing and archiving of physical or paper resource used in the election
process;

(m) Utilize or generate official ballots as herein defined;

(n) Provide the voter a system of verification to find out whether or not the machine has registered his
choice; and

(o) Configure access control for sensitive system data and functions.

"In the procurement of this system, the Commission shall develop and adopt an evaluation system to
ascertain that the above minimum system capabilities are met. This evaluation system shall be developed
with the assistance of an advisory council."

SECTION 8. A new Section 7 is hereby provided to read as follows:

"SECTION 7. Communication Channels for Electronic Transmissions. - All electronic transmissions

by and among the AES and its related components shall utilize secure communication channels as
recommended by the Advisory Council, to ensure authentication and integrity of transmissions."

124
SECTION 9. New Sections 8, 9, 10 and 11 are hereby provided to read as follows:

"SECTION 8. The Advisory Council. - The Commission shall create an Advisory Council, hereafter
referred to as the Council, which shall be convened not later than eighteen (18) months prior to the next
scheduled electoral exercise, and deactivated six months after completion of canvassing: Provided, for
purposes of the 2007 elections, the Advisory Council shall be immediately convened within ten (10) days
after the effectivity of this Act.

"The Council shall be composed of the following members, who must be registered Filipino voters, of
known independence, competence and probity;

"(a) The Chairman of the Commission on Information and Communications Technology (CICT) who shall
act as the chairman of the Council;

"(b) One member from the Department of Science and Technology;

"(c) One member from the Department of Education;

"(d) One member representing the academe, to be selected by the chair of the Advisory Council from among
the list of nominees submitted by the country's academic institutions;

"(e) Three members representing ICT professional organizations to be selected by the chair of the Advisory
Council from among the list of nominees submitted by Philippine-based ICT professional organizations.
Nominees shall be individuals, at least one of whom shall be experienced in managing or implementing
large-scale IT projects.

"(f) Two members representing non-governmental electoral reform organizations, to be selected by the
chair of the Advisory Council from among the list of nominees submitted by the country's non-
governmental electoral reform organizations.

"A person who is affiliated with any political party or candidate for any national position, or is related to a
candidate for any national position by affinity or consanguinity within the fourth civil degree, shall not be
eligible for appointment or designation to the Advisory Council. Should any such situation arise at any time
during the incumbency of a member, the designation or appointment of that member shall ipso facto be
terminated.

125
"Any member of the Advisory Council is prohibited from engaging, directly or indirectly, with any entity
that advocates, markets, imports, produces or in any manner handles software, hardware or any equipment
that may be used for election purposes for personal gain.

"Any violation of the two immediately preceding paragraphs shall disqualify said member from the
Advisory Council and shall be punishable as provided in this Act and shall be penalized in accordance with
the Anti-Graft and Corrupt Practices Act and other related laws.

"The council may avail itself of the expertise and services of resource persons who are of known
independence, competence and probity, are nonpartisan, and do not possess any of the disqualifications
applicable to a member of the Advisory Council as provided herein. The resource persons shall also be
subject to the same prohibitions and penalties as the members of the Advisory Council.

"The Commission on Information and Communications Technology (CICT) shall include in its annual
appropriation the funds necessary to enable the Council to effectively perform its functions."

"SECTION 9. Functions of the Advisory Council. - The Council shall have the following functions:

1. Recommend the most appropriate, secure, applicable and cost-effective technology to be applied
in the AES, in whole or in part, at that specific point in time.

2. Participate as nonvoting members of the Bids and Awards Committee in the conduct of the bidding
process for the AES. Members of the Advisory Council representing the ICT professional
organizations are hereby excluded from participating in any manner in the Bids and Awards
Committee.

3. Participate as nonvoting members of the steering committee tasked with the implementation of the
AES. Members of the Advisory Council representing the ICT professional organizations are hereby
excluded from participating in any manner in the steering committee.

4. Provide advice and assistance in the review of the systems planning, inception, development,
testing, operationalization, and evaluation stages.

126
 5. Provide advice and/or assistance in the identification, assessment and resolution of systems
problems or inadequacies as may surface or resurface in the course of the bidding, acquisition,
testing, operationalization, re-use, storage or disposition of the AES equipment and/or resources as
the case may be.

6. Provide advice and/or assistance in the risk management of the AES especially when a contingency
or disaster situation arises.

7. Prepare and submit a written report, which shall be submitted within six months from the date of
the election to the oversight committee, evaluating the use of the AES.

Nothing in the role of the Council or any outside intervention or influence shall be construed as an
abdication or diminution of the Commission's authority and responsibility for the effective development,
management and implementation of the AES and this Act."

The Advisory Council shall be entitled to a just and reasonable amount of per diem allowances and/or
honoraria to cover the expenses of the services rendered chargeable against the budget of the Commission."

"SECTION 10. The Technical Evaluation Committee. - The Commission, in collaboration with the
chairman of the Advisory Council, shall establish an independent technical evaluation committee, herein
known as the Committee, composed of a representative each from the Commission, the Commission on
Information and Communications Technology and the Department of Science and Technology who shall
act as Chairman of the Committee.

"The Committee shall be immediately convened within ten (10) days after the effectivity of this Act."

"SECTION 11. Functions of the Technical Evaluation Committee. - The Committee shall certify,
through an established international certification entity to be chosen by the Commission from the
recommendations of the Advisory Council, not later than three months before the date of the electoral
exercise, categorically stating that the AES, including its hardware and software components, is operating
properly, securely, and accurately, in accordance with the provisions of this Act based, among others, on
the following documented results:

1. The successful conduct of a field testing process followed by a mock election event in one or more
cities/municipalities;

127
 2. The successful completion of audit on the accuracy, functionality and security controls of the AES
software;

3. The successful completion of a source code review;

4. A certification that the source code is kept in escrow with the Bangko Sentral ng Pilipinas;

5. A certification that the source code reviewed is one and the same as that used by the equipment;
and

6. The development, provisioning, and operationalization of a continuity plan to cover risks to the
AES at all points in the process such that a failure of elections, whether at voting, counting or
consolidation, may be avoided.

For purposes of the 2007 elections, the certification shall be done not later than eight weeks prior to the
date of the elections.

"If the Commission decides to proceed with the use of the AES without the Committee's certification, it
must submit its reason in writing, to the Oversight Committee, no less than thirty (30) days prior to the
electoral exercise where the AES will be used.

"The Committee may avail itself of the expertise and services of resource persons who are of known
independence, competence and probity, are non partisan, and who do not possess any of the
disqualifications applicable to a member of the Advisory Council as provided herein. The resource persons
shall also be subject to the same prohibitions and penalties as the members of the Advisory Council.

"The Committee shall closely coordinate with the steering committee of the Commission tasked with the
implementation of the AES in the identification and agreement of the project deliverables and timelines,
and in the formulation of the acceptance criteria for each deliverable."

SECTION 10. Section 8 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 12. Procurement of Equipment and Materials. - To achieve the purpose of this Act, the
Commission is authorized to procure, in accordance with existing laws, by purchase, lease, rent or other
forms of acquisition, supplies, equipment, materials, software, facilities and other services, from local or

128
foreign sources free from taxes and import duties, subject to accounting and auditing rules and regulations.
With respect to the May 10, 2010 elections and succeeding electoral exercises, the system procured must
have demonstrated capability and been successfully used in a prior electoral exercise here or abroad.
Participation in the 2007 pilot exercise shall not be conclusive of the system's fitness.

"In determining the amount of any bid from a technology, software or equipment supplier, the cost to the
government of its deployment and implementation shall be added to the bid price as integral thereto. The
value of any alternative use to which such technology, software or equipment can be put for public use shall
not be deducted from the original face value of the said bid."

SECTION 11. Section 9 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 13. Continuity Plan. - The AES shall be so designed to include a continuity plan in case of a
systems breakdown or any such eventuality which shall result in the delay, obstruction or nonperformance
of the electoral process. Activation of such continuity and contingency measures shall be undertaken in the
presence of representatives of political parties and citizens' arm of the Commission who shall be notified
by the election officer of such activation.

"All political parties and party-lists shall be furnished copies of said continuity plan at their official
addresses as submitted to the Commission. The list shall be published in at least two newspapers of national
of circulation and shall be posted at the website of the Commission at least fifteen (15) days prior to the
electoral activity concerned."

SECTION 12. Section 10 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 14. Examination and Testing of Equipment or Device of the AES and Opening of the
Source Code for Review. - The Commission shall allow the political parties and candidates or their
representatives, citizens' arm or their representatives to examine and test.

"The equipment or device to be used in the voting and counting on the day of the electoral exercise, before
voting starts. Test ballots and test forms shall be provided by the Commission.

"Immediately after the examination and testing of the equipment or device, the parties and candidates or
their representatives, citizens' arms or their representatives, may submit a written comment to the election
officer who shall immediately transmit it to the Commission for appropriate action.

"The election officer shall keep minutes of the testing, a copy of which shall be submitted to the
Commission together with the minutes of voting."

129
"Once an AES technology is selected for implementation, the Commission shall promptly make the source
code of that technology available and open to any interested political party or groups which may conduct
their own review thereof."

SECTION 13. Section 11 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 15. Official Ballot. - The Commission shall prescribe the format of the electronic display
and/or the size and form of the official ballot, which shall contain the titles of the position to be filled and/or
the propositions to be voted upon in an initiative, referendum or plebiscite. Where practicable, electronic
displays must be constructed to present the names of all candidates for the same position in the same page
or screen, otherwise, the electronic displays must be constructed to present the entire ballot to the voter, in
a series of sequential pages, and to ensure that the voter sees all of the ballot options on all pages before
completing his or her vote and to allow the voter to review and change all ballot choices prior to completing
and casting his or her ballot. Under each position to be filled, the names of candidates shall be arranged
alphabetically by surname and uniformly indicated using the same type size. The maiden or married name
shall be listed in the official ballot, as preferred by the female candidate. Under each proposition to be voted
upon, the choices should be uniformly indicated using the same font and size.

"A fixed space where the chairman of the board of election inspectors shall affix his/her signature to
authenticate the official ballot shall be provided.

"For this purpose, the Commission shall set the deadline for the filing of certificate of candidacy/petition
of registration/manifestation to participate in the election. Any person who files his certificate of candidacy
within this period shall only be considered as a candidate at the start of the campaign period for which he
filed his certificate of candidacy: Provided, That, unlawful acts or omissions applicable to a candidate shall
take effect only upon the start of the aforesaid campaign period: Provided, finally, That any person holding
a public appointive office or position, including active members of the armed forces, and officers and
employees in government-owned or -controlled corporations, shall be considered ipso facto resigned from
his/her office and must vacate the same at the start of the day of the filing of his/her certificate of candidacy.

"Political parties may hold political conventions to nominate their official candidates within thirty (30) days
before the start of the period for filing a certificate of candidacy.

"With respect to a paper-based election system, the official ballots shall be printed by the National Printing
Office and/or the Bangko Sentral ng Pilipinas at the price comparable with that of private printers under
proper security measures which the Commission shall adopt. The Commission may contract the services of
private printers upon certification by the National Printing Office/Bangko Sentral ng Pilipinas that it cannot

130
meet the printing requirements. Accredited political parties and deputized citizen's arms of the Commission
shall assign watchers in the printing, storage and distribution of official ballots.

"To prevent the use of fake ballots, the Commission through the Committee shall ensure that the necessary
safeguards, such as, but not limited to, bar codes, holograms, color shifting ink, microprinting, are provided
on the ballot.

"The official ballots shall be printed and distributed to each city/municipality at the rate of one ballot for
every registered voter with a provision of additional three ballots per precinct."

SECTION 14. Section 13 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 17. Ballot box. - Where applicable, there shall be in each precinct on election day a ballot box
with such safety features that the Commission may prescribe and of such size as to accommodate the official
ballots."

SECTION 15. Section 14 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 18. Procedure in voting. - The Commission shall prescribe the manner and procedure of
voting, which can be easily understood and followed by the voters, taking into consideration, among other
things, the secrecy of the voting."

SECTION 16. Section 15 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 19. Closing of polls. - The Commission shall prescribe the time, manner and procedure of
closing the polls and the steps for the correct reporting of votes cast and the proper conduct of counting for
areas covered by the AES."

SECTION 17. Section 16 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 20. Notice of Designation of Counting Centers. - The election officer shall post prominently
in his/her office, in the bulletin boards at the city/municipal hall and in three other conspicuous places in
the city/municipality, the notice on the designated counting center(s) for at least three weeks prior to
election day. The notice shall specify the precincts covered by each counting center and the number of
registered voters in each of said precincts. The election officer shall also furnish a copy of the notice to the
headquarters or official address of the political parties or independent candidates within the same period.
The election officer shall post in the Commission website concerned the said notice and publish the notices
in the local newspapers. Where the polling place or voting center is also the designated counting center,
such information shall be contained in the notice.

131
"The Commission may not designate as counting center any building or facility located within the premises
of a camp, reservation compound, headquarters, detachment, or field office of the military, police, prison
or detention bureau, or any law enforcement or investigation agency."

SECTION 18. Section 17 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 21. Counting Procedure. - The Commission shall prescribe the manner and procedure of
counting the votes under the automated system: Provided, That apart from the electronically stored result,
thirty (30) copies of the election return are printed."

SECTION 19. Section 18 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 22. Electronic Returns. - Each copy of the printed election returns shall bear appropriate
control marks to determine the time and place of printing. Each copy shall be signed and thumbmarked by
all the members of the board of election inspectors and the watchers present. If any member of the board
of election inspectors present refuses to sign, the chairman of the board shall note the same copy in each
copy of the printed election returns. The member of the board of election inspectors concerned refusing to
sign shall be compelled to explain his or her refusal to do so. Failure to explain an unjustifiable refusal to
sign each copy of the printed election return by any member of the board of election inspectors shall be
punishable as provided in this Act. The chairman of the board shall then publicly read and announce the
total numbers of registered voters, the total number of voters who actually voted and the total numbers of
votes obtained by each candidate based on the election returns.

"Thereafter, the copies of the election returns shall be sealed and placed in the proper envelopes for
distribution as follows:

"A. In the election of president, vice-president, senators and party-list system;

1) The first copy shall be delivered to the city or municipal board of canvassers;

2) The second copy, to the Congress, directed to the President of the Senate;

3) The third copy, to the Commission;

4) The fourth copy, to the citizens' arm authorized by the Commission to conduct an unofficial count.

5) The fifth copy, to the dominant majority party as determined by the Commission in accordance with law;

132
6) The sixth copy, to the dominant minority party as determined by the Commission in accordance with
law; and

7) The seventh copy shall be deposited inside the compartment of the ballot box for valid ballots.

8) The eighth copy, to the Provincial Board of Canvassers;

9) The ninth to the eighteenth copies, to the ten (10) accredited major national parties, excluding the
dominant majority and minority parties, in accordance with a voluntary agreement among them. If no such
agreement is reached, the Commission shall decide which parties shall receive the copies on the basis of
the criteria provided in Section 26 of Republic Act No. 7166;

10) The nineteenth and twentieth copies, to the two accredited major local parties in accordance with a
voluntary agreement among them. If no such agreement is reached, the Commission shall decide which
parties shall receive the copies on the basis of criteria analogous to that provided in Section 26 of Republic
Act No. 7166;

11) The twenty-first to the twenty-fourth copies, to national broadcast or print media entities as may be
equitably determined by the Commission in view of propagating the copies to the widest extent possible;

12) The twenty-fifth and twenty-sixth copies, to local broadcast or print media entities as may be equitably
determined by the Commission in view of propagating the copies to the widest extent possible; and

13) The twenty-seventh to the thirtieth copies, to the major citizens' arms, including the accredited citizens'
arm, and other non-partisan groups or organization enlisted by the Commission pursuant to Section 52(k)
of Batas Pambansa Blg. 881. Such citizens' arms, groups and organizations may use the four certified copies
of election returns for the conduct of citizens' quick counts at the local or national levels;

"B. In the election of local officials and members of the House of Representatives:

1) The first copy shall be delivered to the city or municipal board of canvassers;

2) The second copy, to the Commission;

3) The third copy, to the provincial board of canvassers;

4) The fourth copy, to the citizens' arm authorized by the Commission to conduct an unofficial count.

133
5) The fifth copy, to the dominant majority party as determined by the Commission in accordance with law;

6) The sixth copy, to the dominant minority party as determined by the Commission in accordance with
law; and

7) The seventh copy shall be deposited inside the compartment of the ballot box for valid ballots;

8) The eight copy to be posted conspicuously on a wall within the premises of the polling place or counting
center;

9) The ninth to the eighteenth copies, shall be given to the ten (10) accredited major national parties,
excluding the dominant majority and minority parties, in accordance with a voluntary agreement among
them. If no such agreement is reached, the Commission shall decide which parties shall receive the copies
on the basis of the criteria provided in Section 26 of Republic Act No. 7166;

10) The nineteenth and twentieth copies shall be given to the two accredited major local parties in
accordance with a voluntary agreement among them. If no such agreement is reached, the Commission shall
decide which parties shall receive the copies on the basis of criteria analogous to that provided in Section
26 of Republic Act No. 7166;

11) The twenty-first to the twenty-fifth copies, to national broadcast or print media entities as may be
equitably determined by the Commission in view of propagating the copies to the widest extent possible;

12) The twenty-sixth and twenty-seventh copies, to local broadcast or print media entities as may be
equitably determined by the Commission in view of propagating the copies to the widest extent possible;
and

13) The twenty-eighth to the thirtieth copies to the major citizens' arms, including the accredited citizens'
arm, and other non-partisan groups or organizations enlisted by the Commission pursuant to section 52(k)
of Batas Pambansa Blg. 881. Such citizens' arms, groups and organizations may use the five certified copies
of election returns for the conduct of citizens' quick counts at the local or national levels.

"Immediately after the eight copy is printed, the poll clerk shall announce the posting of said copy on a wall
within the premises of the polling place or counting center, which must be sufficiently lighted and accessible
to the public. Any person may view or capture an image of the election return by means of any data
capturing device such as, but not limited to, cameras at any time of the day for forty-eight (48) hours
following its posting. After such period, the chairman of the board of election inspectors shall detach the

134
election return from the wall and keep the same in his custody to be produced as may be requested by any
voter for image or data capturing or for any lawful purpose as may be ordered by competent authority.

"Within one hour after the printing of the election returns, the chairman of the board of election inspectors
or any official authorized by the Commission shall, in the presence of watchers and representatives of the
accredited citizen's arm, political parties/candidates, if any, electronically transmit the precinct results to
the respective levels of board of canvassers, to the dominant majority and minority party, to the accredited
citizen's arm, and to the Kapisanan ng mga Broadcasters ng Pilipinas (KBP).

"The election results at the city/municipality canvassing centers shall be transmitted in the same manner by
the election officer or any official authorized by the Commission to the district or provincial canvassing
centers.

"The election returns transmitted electronically and digitally signed shall be considered as official election
results and shall be used as the basis for the canvassing of votes and the proclamation of a candidate."

"After the electronic results have been transmitted, additional copies not to exceed thirty (30) may be printed
and given to requesting parties at their own expense."

SECTION 20. Section 21 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 25. Canvassing by Provincial, City, District and Municipal Boards of Canvassers. - The
city or municipal board of canvassers shall canvass the votes for the president, vice-president, senators, and
parties, organizations or coalitions participating under the party-list system by consolidating the
electronically transmitted results or the results contained in the data storage devices used in the printing of
the election returns. Upon completion of the canvass, it shall print the certificate of canvass of votes for
president, vice-president, senators and members of the House of Representatives and elective provincial
officials and thereafter, proclaim the elected city or municipal officials, as the case may be.

"The city board of canvassers of cities comprising one or more legislative districts shall canvass the votes
for president, vice-president, senators, members of the House Representatives and elective city officials by
consolidating the certificates of canvass electronically transmitted or the results contained in the data
storage devices used in the printing of the election returns. Upon completion of the canvass, the board shall
produce the canvass of votes for president, vice-president, and senators and thereafter, proclaim the elected
members of the House of Representatives and city officials.

135
"In the Metro Manila area, each municipality comprising a legislative district shall have a district board of
canvassers which shall canvass the votes for president, vice-president, senators, members of the House of
Representatives and elective municipal officials by consolidating the electronically transmitted results or
the results contained in the data storage devices used in the printing of the election returns. Upon completion
of the canvass, it shall produce the certificate of canvass of votes for president, vice-president, and senators
and thereafter, proclaim the elected members of the House Representatives and municipal officials.

"Each component municipality in a legislative district in the Metro Manila area shall have a municipal
board of canvassers which shall canvass the votes for president, vice-president, senators, members of the
House of Representatives and elective municipal officials by consolidating the results electronically
transmitted from the counting centers or the results contained in the data storage devices used in the printing
of the election returns. Upon completion of the canvass, it shall prepare the certificate of canvass of votes
for president, vice-president, senators, members of the House of Representatives and thereafter, proclaim
the elected municipal officials.

"The district board of canvassers of each legislative district comprising two municipalities in the Metro
Manila area shall canvass the votes for president, vice-president, senators and members of the House of
Representatives by consolidating the certificates of canvass electronically transmitted from the
city/municipal consolidating centers or the results contained in the data storage devices submitted by the
municipal board of canvassers of the component municipalities. Upon completion of the canvass, it shall
produce a certificate of canvass of votes for president, vice-president and senators and thereafter, proclaim
the elected members of the House of Representatives in the legislative district.

"The district/provincial board of canvassers shall canvass the votes for president, vice-president, senators,
members of the House of Representatives and elective provincial officials by consolidating the results
electronically transmitted from the city/municipal consolidating centers or the results contained in the data
storage devices submitted by the board of canvassers of the municipalities and component cities. Upon
completion of the canvass, it shall produce the certificate of canvass votes for president, vice-president and
senators and thereafter, proclaim the elected members of the House of Representatives and the provincial
officials.

"The municipal, city, district and provincial certificates of canvass of votes shall each be supported by a
statement of votes.

"Within one hour after the canvassing, the Chairman of the district or provincial Board of Canvassers or
the city board of canvassers of those cities which comprise one or more legislative districts shall

136
electronically transmit the certificates of canvass to the Commission sitting as the national board of
canvassers for senators and party-list representatives and to the Congress as the National Board of
Canvassers for the president and vice president, directed to the President of the Senate.

"The Commission shall adopt adequate and effective measures to preserve the integrity of the certificates
of canvass transmitted electronically and the results in the storage devices at the various levels of the boards
of canvassers.

"The certificates of canvass transmitted electronically and digitally signed shall be considered as official
election results and shall be used as the basis for the proclamation of a winning candidate."

SECTION 21. Section 22 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 26. Number of Copies of Certificates of Canvass of Votes and Their Distribution. -

(a) The certificate of canvass of votes for president, vice-president, senators, members of the House of
Representatives, parties, organizations or coalitions participating under the party-list system and elective
provincial officials shall be produced by the city or municipal board of canvassers and distributed as
follows:

"(1) The first copy shall be delivered to the provincial board of canvassers for use in the canvass of election
results for president, vice-president, senators, members of the House of Representatives, parties,
organizations or coalitions participating under the party-list system and elective provincial officials;

"(2) The second copy shall be sent to the Commission;

"(3) The third copy shall be kept by the chairman of the board; and

"(4) The fourth copy shall be given to the citizens' arm designated by the Commission to conduct an
unofficial count. It shall be the duty of the citizens' arm to furnish independent candidates copies of the
certificate of canvass at the expense of the requesting party.

"(5) The fifth copy to Congress, directed to the President of Senate;

"(6) The sixth copy to be posted on a wall within the premises of the canvassing center;

"(7) The seventh and eighth copies shall be given to the dominant majority and minority parties;

137
"(8) The ninth to eighteenth copies shall be given to the ten (10) accredited major national parties, excluding
the dominant majority and minority parties, in accordance with a voluntary agreement among them. If no
such agreement is reached, the Commission shall decide which parties shall receive the copies on the basis
of the criteria provided in Section 26 of Republic Act No. 7166;

"(9) The nineteenth and twentieth copies shall be given to the two accredited major local parties in
accordance with a voluntary agreement among them. If no such agreement is reached, the Commission shall
decide which parties shall receive the copies on the basis of criteria analogous to that provided in Section
26 of Republic Act No. 7166;

"(10) The twenty-first to the twenty-fifth copies, to national broadcast or print media entities as may be
equitably determined by the Commission in view of propagating the copies to the widest extent possible;

"(11) The twenty-sixth and twenty-seventh copies, to local broadcast or print media entities as may be
equitably determined by the Commission in view of propagating the copies to the widest extent possible;
and

"(12) The twenty-eighth to the thirtieth copies, to the major citizens' arms, including the accredited citizens'
arm, and other non-partisan groups or organizations enlisted by the Commission pursuant to Section 52(k)
of Batas Pambansa Blg. 881. Such citizens' arms, groups and organization may use the three certified copies
of election returns for the conduct of citizens' quick counts at the local or national levels."

"The board of canvassers shall furnish all other registered parties copies of the certificate of canvass at the
expense of the requesting party.

"(b) The certificate of canvass of votes for president, vice-president and senators, parties, organizations or
coalitions participating under the party-list system shall be produced by the city boards of canvassers of
cities comprising one or more legislative districts, by provincial boards of canvassers and by district boards
of canvassers in the Metro Manila area, and other highly urbanized areas and distributed as follows:

"(1) The first copy shall be sent to Congress, directed to the President of the Senate for use in the canvass
of election results for president and vice-president;

"(2) The second copy shall be sent to the Commission for use in the canvass of the election results for
senators;

"(3) The third copy shall be kept by the chairman of the board; and

138
"(4) The fourth copy shall be given to the citizens' arm designated by the Commission to conduct an
unofficial count. It shall be the duty of the citizens' arm to furnish independent candidates copies of the
certificate of canvass at the expense of the requesting party.

"(5) The fifth copy to Congress, directed to the President of the Senate;

"(6) The six copy to be posted on a wall within the premises of the canvassing center;

"(7) The seventh and eight copies to the dominant majority and minority parties;

"(8) The ninth and tenth copies to two accredited major national parties representing the majority and the
minority, excluding the dominant majority and minority parties, to be determined by the Commission on
the basis of the criteria provided in Section 26 of Republic Act No. 7166;

"(9) The eleventh to thirteenth copies to national broadcast media entities as may be equitably determined
by the Commission in view of propagating the copies to the widest extent possible; and

"(10) The fourteenth copy to another citizens' arm or in the absence thereof, to a non-partisan group or
organization enlisted by the Commission pursuant to Section 52(k) of Batas Pambansa Blg. 881. Such
citizens' arm or non-partisan group or organization may use the copy of election return for the conduct of
citizens' quick counts at the local or national levels.

"The board of canvassers shall furnish all other registered parties copies of the certificate of canvass at the
expense of the requesting party.

"(c) The certificates of canvass printed by the provincial, district, city or municipal boards of canvassers
shall be signed and thumb marked by the chairman and members of the board and the principal watchers,
if available. Thereafter, it shall be sealed and placed inside an envelope which shall likewise be properly
sealed.

"In all instances, where the Board of Canvassers has the duty to furnish registered political parties with
copies of the certificate of canvass, the pertinent election returns shall be attached thereto, where
appropriate."

"Immediately after the sixth copy and its supporting statement of votes are printed, the chairman of the
board of canvassers shall announce the posting of said prints on a wall within the premises of the canvassing
center, which must be sufficiently lighted and accessible to the public. Any person may view or capture an
image of the Certificate of Canvass or the supporting statement of votes by means of any data capturing

139
device such as, but not limited to, cameras at any time of the day for forty-eight (48) hours following the
posting. After such period, the chairman of the board of canvassers shall detach the election return from the
wall and keep the same in his custody to be produced as may be requested by any voter for image or data
capturing or for any lawful purpose as may be ordered by competent authority."

SECTION 22. Section 23 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 27. National Board of Canvassers for Senators and Party-List Representatives. - The
chairman and members of the Commission on Elections sitting en banc, shall compose the national board
of canvassers for senators and party-list representatives. It shall canvass the results by consolidating the
certificates of canvass electronically transmitted. Thereafter, the national board shall proclaim the winning
candidates for senators and party-list representatives."

SECTION 23. Section 24 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 28. Congress as the National Board of Canvassers for President and Vice-President. -
The Senate and the House of Representatives in joint public session shall compose the national board of
canvassers for president and vice-president. The certificate of canvass for president and vice-president duly
certified by the board of canvassers of each province or city, shall be electronically transmitted to the
Congress, directed to the president of the Senate. Upon receipt of the certificates of canvass, the President
of the Senate shall, not later than thirty (30) days after the day of the election, open all the certificates in
the presence of the Senate and the House of Representatives in joint public session and the Congress upon
determination of the authenticity and the due execution thereof in the manner provided by law, canvass all
the results for president and vice-president and thereafter, proclaim the winning candidates."

SECTION 24. A new Section 29 is hereby provided to reads as follows:

"SEC 29. Random Manual Audit. - Where the AES is used, there shall be a random manual audit in one
precinct per congressional district randomly chosen by the Commission in each province and city. Any
difference between the automated and manual count will result in the determination of root cause and
initiate a manual count for those precincts affected by the computer or procedural error."

SECTION 25. A new Section 30 is hereby provided to read as follows:

"SECTION 30. Authentication of Electronically Transmitted Election Results. - The manner of

determining the authenticity and due execution of the certificates shall conform with the provisions
of Republic Act No. 7166 as may be supplemented or modified by the provisions of this Act, where
applicable, by appropriate authentication and certification procedures for electronic data, electronic

140
documents and electronic signatures as provided in Republic Act No. 8792 as well as the rules promulgated
by the Supreme Court pursuant thereto."

SECTION 26. Section 25 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 31. Stakeholder education and training. - The Commission shall, not later than six months
before the actual automated election exercise, undertake a widespread stakeholder education and training
program, through newspapers of general circulation, radio, television and other media forms, as well as
through seminars, symposia, fora and other nontraditional means, to educate the public and fully inform the
electorate about the AES and inculcate values on honest, peaceful, orderly and informed elections.

"Such program shall ensure the acceptance and readiness of the following stakeholders to understand and
appreciate the benefits of the AES:

1. General public/voters;

2. Commission's staff;

3. Department of Education, Department of Finance (municipal, city and provincial treasurers) and
all other government agencies who will play a role in the electoral exercise;

4. Local government officials (provincial, municipal, barangay levels);

5. Incumbent elected officials in the legislative and executive departments;

6. Political parties and candidates;

7. Members of the military and police.

"The general public or voters training will focus on building the capability to use the automated system to
cast their vote, as well as general appreciation of the AES. All other stakeholders mentioned above will
receive additional information in order to build a deeper understanding of the voting, counting, canvassing
procedures, so that they may act as advocates of the AES.

"The Commission together with and in support of accredited citizens' arms shall carry out a continuing and
systematic campaign through newspapers of general circulation, radio and other media forms, as well as
through seminars, symposia, fora and other nontraditional means to educate the public and fully inform the
electorate about the AES and inculcate values on honest, peaceful and orderly elections."

141
SECTION 27. Section 27 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 33. Joint Congressional Oversight Committee. - An Oversight Committee is hereby created
composed of seven members each from the Senate and the House of Representatives, four of whom shall
come from the majority and three from the minority, to monitor and evaluate the implementation of this
Act. A written report to the Senate and the House of Representatives shall be submitted by the Advisory
Council within six months from the date of election. The oversight committee shall conduct a mandatory
review of this Act every twelve (12) months from the date of the last regular national or local elections."

"The oversight committee shall conduct a comprehensive assessment and evaluation of the performance of
the different AES technologies implemented and shall make appropriate recommendations to Congress, in
session assembled, specifically including the following:

"1. An assessment and comparison of each of the AES technologies utilized, including their strengths,
weakness, applicability or inapplicability in specific areas and situations;

"2. An evaluation of their accuracy through a comparison of a random sample of the AES election results
with a manual tabulation, and the conduct of similar tests;

"3. As to the scope of AES implementation in the subsequent elections, provide for recommendations as to
whether any of the following should be adopted:

"a. Further test application of the AES or a particular AES technology used in the 2007 elections, whether
in the same or others areas;

"b. An increase or enlargement of areas for implementation of the AES or an AES technology and not a
full implementation; or

"c. A full implementation of the AES.

"4. As to the kind of AES technology, provide for proposals as to whether:

"a) A particular AES technology should no longer be utilized for being obsolete, inapplicable, inaccurate
or with a defect which cannot be remedied;

"b) An enhancement or improvement is needed to an AES technology which was used in the 2007 elections
to make it more functional, appropriate and accurate;

142
"c) A particular AES technology is already appropriate and should be utilized fully for subsequent elections;
or

"d) The testing or adoption of new technologies which may have emerged after the 2007 elections is
needed."

SECTION 28. Section 29 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 35. Prohibited Acts and Penalties. - The following shall be penalized as provided in this Act,
whether or not said acts affect the electoral process or results:

"(a) Utilizing without authorization, tampering with, damaging, destroying or stealing:

"(1) Official ballots, election returns, and certificates of canvass of votes used in the system; and

"(2) Electronic devices or their components, peripherals or supplies used in the AES such as counting
machine, memory pack/diskette, memory pack receiver and computer set;

"(b) Interfering with, impeding, absconding for purpose of gain, preventing the installation or use of
computer counting devices and the processing, storage, generation and transmission of election results, data
or information;

"(c) Gaining or causing access to using, altering, destroying or disclosing any computer data, program,
system software, network, or any computer-related devices, facilities, hardware or equipment, whether
classified or declassified;

"(d) Refusal of the citizens' arm to present for perusal its copy of election return to the board of canvassers;

"(e) Presentation by the citizens' arm of tampered or spurious election returns;

"(f) Refusal or failure to provide the dominant majority and dominant minority parties or the citizens' arm
their copy of election returns; and

"(g) The failure to post the voters' list within the specified time, duration and in the designated location
shall constitute an election offense on the part [of] the election officer concerned."

"Any person convicted for violation of this Act, except those convicted of the crime of electoral sabotage,
shall be penalized with imprisonment of eight years and one day to twelve (12) years without possibility of

143
parole, and perpetual disqualification to hold public office and deprivation of the right of suffrage.
Moreover, the offender shall be perpetually disqualified to hold any non-elective public office."

SECTION 29. Section 30 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 36. Applicability. - The provisions of Batas Pambansa Blg. 881, as amended, otherwise
known as the 'Omnibus Election Code of the Philippines', and other election laws not inconsistent with this
Act shall apply."

SECTION 30. Section 31 of Republic Act No. 8436 is hereby amended to read as follows:

"SECTION 37. Rules and Regulations. - The Commission shall promulgate rules and regulations for the
implementation and enforcement of this Act.

"Notwithstanding the foregoing canvassing procedure, the Commission is authorized to prescribe other
manner or procedure for the canvassing and consolidation of votes as technology evolves, subject to the
provisions of Section 7 hereof on the minimum capabilities of the AES and other pertinent laws."

SECTION 31. Section 25 of Republic Act No. 7166 is hereby amended to read as follows:

"Sec 25. Manner of Counting Votes. - In addition to the requirement in the fourth paragraph of Section
12 of the Republic Act No. 6646 and Section 210 of the Omnibus Election Code, in reading the official
ballots during the counting, the chairman, the poll clerk and the third member shall assume such positions
as to provide the watchers and the members of the public as may be conveniently accommodated in the
polling place, an unimpeded view of the ballot being ready by the chairman, of the election return and the
tally board being simultaneously accomplished by the poll clerk and the third member respectively, without
touching any of these election documents. The table shall be cleared of all unnecessary writing
paraphernalia. Any violation of this requirement shall constitute an election offense punishable
under Sections 263 and 264 the Omnibus Election Code.

"The chairman shall first read the votes for national positions.

"Any violation of this Section, or its pertinent portion, shall constitute an election offense and shall be
penalized in accordance with Batas Pambansa Blg. 881.

SECTION 32. Section 212 of Batas Pambansa Blg. 881 as amended, is hereby to read as follows:

"SECTION 212. Election Returns. - The board of election inspectors shall prepare the election returns
simultaneously with the counting of votes in the polling places as prescribed in Section 210 hereof. The

144
recording of vote shall be made as prescribed in said section. The entry of votes in words and figures for
each candidate shall be closed with the signature and the clear imprint of the thumbmark of the right hand
of all the members, likewise to be affixed in full view of the public, immediately after the last vote recorded
or immediately after the name of the candidate who did not receive any vote."

"The returns shall also show the date of the election, the polling place, the barangay and the city or
municipality in which it was held, the total number of ballots found in the compartment for valid ballots,
the total number of valid ballots withdrawn from the compartment for spoiled ballots because they were
erroneously placed therein, the total number of excess ballots, the total number of marked or void ballots,
and the total numbers of votes obtained by each candidate, writing out the said number in words and figures
and, at the end thereof, the board of election inspectors shall certify that the contents are correct. The returns
shall be accomplished in a single sheet of paper, but if this is not possible, additional sheets may be used
which shall be prepared in the same manner as the first sheet and likewise certified by the board of election
inspectors."

"The Commission shall take steps so that the entries on the first copy of the election returns are clearly
reproduced on the second, third, fourth, fifth, and sixth copies thereof, and for the purpose this Commission
shall use a special kind of paper."

"Immediately upon the accomplishment of the election return for national positions, the poll clerk shall
announce the posting of the second copy of the election return on a wall with sufficient lighting within the
premises of the polling place or counting center. He shall then proceed to do the same in the presence of
the other members of the Board, the watchers and those present in the polling place or counting center.
Without delay and, when feasible, he shall secure an image of the election return using a secured data
capturing device and immediately thereafter, while in the premises of the polling place or counting center,
directly print thirty (30) copies of the election return. Once the prints have been produced, the poll clerk
shall call the other members of the board to authenticate each print copy by closely comparing the same
with the election return posted on the wall in the presence of the watchers and within view of the public. If
the Board finds each print a faithful reproduction of the election return, all members thereof shall annotate
and sign a certification to that effect on the bottom front of the print.

"Each certified printed copy shall be placed in an envelope and distributed as herein provided. Designated
recipients of the certified print copies may receive their copies at the polling place or counting center.

"Immediately upon the accomplishment of the election returns for local positions, the second copy of the
same shall be posted on a wall with sufficient lighting within the premises of the polling place. "The other

145
copies of election returns for both national and local position shall be sealed in the presence of the watchers
and the public, and placed in the proper envelope, which shall likewise be sealed and distributed as herein
provided."

"Any election return with a separately printed serial number or which bears a different serial number from
that assigned to the particular polling place concerned shall not be canvassed. This is to be determined by
the board of canvassers prior to its canvassing on the basis of the certification of the provincial, city or
municipal treasurer as to the serial number of the election return assigned to the said voting precinct, unless
the Commission shall order in writing for its canvassing, stating the reason for the variance in serial
numbers."

"If the signatures and/or thumbmarks of the members of the board of election inspectors or some of them
as required in this provision are missing in the election returns, the board of canvassers may summon the
members of the board of election inspectors concerned to complete the returns.

"The citizen's arm is mandated to present for perusal its copy of the election return to the board of election
canvassers upon the request of any interested candidate.

"Any violation of this election or its pertinent portion, shall constitute an election offense and shall be
penalized in accordance with Batas Pambansa Blg. 881

"In addition, the following shall likewise be guilty of an election offense:

"(a) Any Person who removes the election return posted on the wall, whether within or after the prescribed
forty-eight (48) hours of posting, or defaces the same in any manner;

"(b) Any person who simulates an actual election return, or a print or digital copy thereof;

"(c) Any person who simulates the certification in a print of an election return;

"(d) The chairman or any member of the board of election inspectors who, during the prescribe period of
posting, removes the election return from the wall on which it had been posted other than for the purpose
of immediately transferring it to a more suitable place;

"(e) The chairman or any member of the board of election inspectors who signs or authenticates a print of
the election return outside of the polling place; and

146
"(f) The chairman or any member of the board of election inspectors who signs or authenticates a print
which bears an image different from the election return produced after counting and posted on the wall."

SECTION 33. Section 27 of Republic Act No. 7166, as amended by Republic Act No. 8045 and Republic
Act No. 8173, is hereby further amended to read as follows:

"SECTION 27. Number of Copies of Election Returns and Their Distribution. - The board of election
inspectors shall prepare in handwriting the election returns in their respective polling places, in the number
of copies herein provided and in the form to be prescribed and provided by the Commission.

"The copies of election returns shall be distributed by the chairman of the board of election inspectors as
follows:

"(a) In the election of president, vice-president, senators and members of the House of Representatives
including the party-list representatives:

"(1) The first copy shall be delivered to the city or municipal board of canvassers;

"(2) The second copy to be posted on a wall within the premises of the polling place;

"(3) The third copy, to the Congress, directed to the President of the Senate;

"(4) The fourth copy, to the Commission;

"(5) The fifth copy, to the dominant majority party as determined by the Commission in accordance with
law;

"(6) The sixth copy, to the dominant minority party as determined by the Commission in accordance with
law;

"(7) The seventh copy, to a citizens' arm authorized by the Commission to conduct an unofficial count:
Provided, however, That the accreditation of the citizens' arm shall be subject to the provisions of Section
52(k) of Batas Pambansa Blg. 881; and

"(8) The eight copy shall be deposited inside the compartment of the ballot box for valid ballots; and

"(b) In the election of local officials:

"(1) The first copy shall be delivered to the city or municipal board of canvassers;

147
"(2) The second copy to be posted on a wall within the premises of the polling place;

"(3) The third copy, to the Commission;

"(4) The fourth copy, to the provincial board of canvassers;

"(5) The fifth copy, to the dominant majority party as determined by the Commission in accordance with
law;

"(6) The sixth copy, to the dominant minority party as determined by the Commission in accordance with
law;

"(7) The seventh copy, to a citizens' arm authorized by the Commission to conduct an unofficial count:
Provided, however, That the accreditation of the citizens' arm shall be subject to the provisions of Section
52(k) of Batas Pambansa Blg. 881; and

"(8) The eighth copy shall be deposited inside the compartment of the ballot box for valid votes.

"The copy of the election return posted on the wall shall be open for public viewing at any time of the day
for forty-eight (48) hours following its posting. Any person may view or capture an image of the election
return by means of any data capturing device such as, but not limited to, cameras at any time of the day for
forty-eight (48) hours following its posting. After the prescribed period for posting, the chairman of the
board of election inspectors shall collect the posted election returns and keep the same in his custody to be
produced for image or data capturing as may be requested by any voter or for any lawful purpose as may
be ordered by competent authority.

"Except for those copies that are required to be delivered, copies of election returns may be claimed at the
polling place. Any unclaimed copy shall be brought by the chairman of the board of election inspectors to
the canvassing center where the recipients or their representatives may claim them. Copies still unclaimed
at the canvassing center shall be deemed placed in the custody of the chairman of the board of election
inspectors, who shall produce them when requested by the recipient or when ordered by a competent
authority.

"The thirty (30) certified print copies of the election return for national positions shall be distributed as
follows:

148
"(a) The first fourteen (14) copies shall be given to the fourteen (14) accredited major national parties in
accordance with a voluntary agreement among them. If no such agreement is reached, the Commission shall
decide which parties shall receive the copies on the basis of the criteria provided in Section 26 hereof;

"(b) The next three copies shall be given to the three accredited major local parties in accordance with a
voluntary agreement among them. If no such agreement is reached, the Commission shall decide which
parties shall receive the copies on the basis of criteria analogous to that provided in Section 26 hereof;

"(c) The next five copies shall be given to national broadcast or print media entities as may be equitably
determined by the Commission in view of propagating the copies to the widest extent possible;

"(d) The next two copies shall be given to local broadcast or print media entities as may be equitably
determined by the Commission in view of propagating the copies to the widest extent possible;

"(e) The next four copies to the major citizens' arms, including the accredited citizens' arm, and other non-
partisan groups or organizations enlisted by the Commission pursuant to Section 52(k) of Batas Pambansa
Blg. 881;

"(f) The next copy to be placed inside the compartment of the ballot box for valid ballots; and

"(g) The last copy to the provincial board of canvassers."

"The certified print copies may be claimed at the polling place. Any unclaimed copy shall be brought by
the chairman of the board of election inspectors to the canvassing center where the recipients or their
representatives may claim them. Copies still unclaimed at the canvassing center shall be placed in the
custody of the chairman of the board election inspectors, who shall produce them when requested by the
recipient or when ordered by a competent authority.

"Any provision of law to the contrary notwithstanding, any of the recipients of the print or digital copies of
the election return may conduct an unofficial consolidation of votes and may announce the result to the
public.

"The Commission shall post its digital files in its website for the public to view or download at any time of
the day. The Commission shall maintain the files at least three years from the date of posting.

"Any violation of this section, or its pertinent portion, shall constitute an election offense and shall be
penalized in accordance with Batas Pambansa Blg. 881."

149
SECTION 34. SECTION 26 of Republic Act No. 7166 is hereby amended to read as follows:

"SECTION 26. Official Watchers. - Every registered political party or coalition of political parties, and
every candidate shall each be entitled to one watcher in every polling place and canvassing center: Provided,
That, candidates for the Sangguniang Panlalawigan, Sangguniang Panlunsod, or Sangguniang Bayan
belonging to the same slate or ticket shall collectively be entitled to only one watcher.

"The dominant majority party and dominant minority party, which the Commission shall determine in
accordance with law, shall each be entitled to one official watcher who shall be paid a fixed per diem of
Four hundred pesos (P400.00).

"There shall also be recognized six principal watchers, representing the six accredited major political parties
excluding the dominant majority and minority parties, who shall be designated by the Commission upon
nomination of the said parties. These political parties shall be determined by the Commission upon notice
and hearing on the basis of the following circumstances:

"(a) The established record of the said parties, coalition of groups that now composed them, taking into
account, among other things, their showing in past elections;

"(b) The number of incumbent elective officials belonging to them ninety (90) days before the date of
election;

"(c) Their identifiable political organizations and strengths as evidenced by their organized/chapters;

"(d) The ability to fill a complete slate of candidates from the municipal level to the position of President;
and

"(e) Other analogous circumstances that may determine their relative organizations and strengths."

SECTION 35. Section 206 of Batas Pambansa Blg. 881 is hereby amended to read as follows:

"SECTION 206. Counting to be Public and Without Interruption. - As soon as the voting is finished,
the board of election inspectors shall publicly count in the polling place the votes cast and ascertain the
results. The Board may rearrange the physical set up of the polling place for the counting or perform any
other activity with respect to the transition from voting [to] counting. However, it may do so only in the
presence of the watchers and within close view of the public. At all times, the ballot boxes and all election
documents and paraphernalia shall be within close view of the watchers and the public.

150
"The board of election inspectors shall not adjourn or postpone or delay the count until it has been fully
completed, unless otherwise ordered by the Commission.

"The Commission, in the interest of free, orderly, and honest election, may authorize the board of election
inspectors to count the votes and to accomplish the election returns and other forms prescribed under this
Code in any other place within a public building in the same municipality or city on account of imminent
danger of widespread violence or similar causes of comparable magnitude: Provided, That the transfer shall
been recommended in writing by the board of election inspectors by unanimous vote and endorsed in
writing by the majority of watchers present: Provided, further, That the said public building shall not be
located within the perimeter of or inside a military or police camp, reservation, headquarters, detachment
or field office nor within the premises of a prison or detention bureau or any law enforcement or
investigation agency.

"Any violation of this section, or its pertinent portion, shall constitute an election offense and shall be
penalized in accordance with Batas Pambansa Blg. 881."

SECTION 36. Section 18 of Republic Act No. 6646 is hereby repealed.

SECTION 37. Section 30 of Republic Act No. 7166 is hereby amended to read as follows:

"SECTION 30. Congress as the National Board of Canvassers for the Election of President and Vice
President: The Commission en banc as the National Board of Canvassers for the election of senators:
Determination of Authenticity and Due Execution of Certificates of Canvass. - Congress and the
Commission en banc shall determine the authenticity and due execution of the certificate of canvass for
president and vice-president and senators, respectively, as accomplished and transmitted to it by the local
boards of canvassers, on a showing that:

(1) each certificate of canvass was executed, signed and thumbmarked by the chairman and members of the
board of canvassers and transmitted or caused to be transmitted to Congress by them;

(2) each certificate of canvass contains the names of all of the candidates for president and vice-president
or senator, as the case may be, and their corresponding votes in words and their corresponding votes in
words and in figures;

(3) there [exists] no discrepancy in other authentic copies of the certificates of canvass or any of its
supporting documents such as statement of votes by city/municipality/by precinct or discrepancy in the
votes of any candidate in words and figures in the certificate; and

151
(4) there exists no discrepancy in the votes of any candidate in words and figures in the certificate of canvass
against the aggregate number of votes appearing in the election returns of precincts covered by the
certificate of canvass: Provided, That certified print copies of election returns or certificates of canvass may
be used for the purpose of verifying the existence of the discrepancy.

"When the certificate of canvass, duly certified by the board of canvass of each province, city [or] district,
appears to be incomplete, the Senate President or the Chairman of the Commission, as the case may be,
shall require the board of canvassers concerned to transmit by personal delivery, the election returns from
polling places that were not included in the certificate of canvass and supporting statements. Said election
returns shall be submitted by personal delivery within two (2) days from receipt of notice.

"When it appears that any certificate of canvass or supporting statement of votes by city/municipality or by
precinct bears erasures or alterations which may cast doubt as to the veracity of the number of votes stated
herein and may affect the result of the election, upon request of the presidential, vice-presidential or
senatorial candidate concerned or his party, Congress or the Commission en banc, as the case may be, shall,
for the sole purpose of verifying the actual number of votes cast for President and Vice-President or senator,
count the votes as they appear in the copies of the election returns submitted to it.

"In case of any discrepancy, incompleteness, erasure or alteration as mentioned above, the procedure on
pre-proclamation controversies shall be adopted and applied as provided in Sections 17, 18, 19 and 20.

"Any person who presents in evidence a simulated copy of an election return, certificate of canvass or
statement of votes, or a printed copy of an election return, certificate of canvass or statement of votes
bearing a simulated certification or a simulated image, shall be guilty of an election offense and shall be
penalized in accordance with Batas Pambansa Blg. 881."

SECTION 38. Section 15 of Republic Act No. 7166 is hereby amended to read as follows:

"SECTION 15. Pre-proclamation Cases in Elections for President, Vice-President, Senator, and
Member of the House of Representatives. - For purposes of the elections for president, vice-president,
senator, and member of the House of Representatives, no pre-proclamation cases shall be allowed on
matters relating to the preparation, transmission, receipt, custody and appreciation of election returns or the
certificates of canvass, as the case may be, except as provided for in Section 30 hereof. However, this does
not preclude the authority of the appropriate canvassing body motu propio or upon written complaint of an
interested person to correct manifest errors in the certificate of canvass or election returns before it.

"Questions affecting the composition or proceedings of the board of canvassers may be initiated in the
board or directly with the Commission in accordance with Section 19 hereof.
152
"Any objection on the election returns before the city or municipal board of canvassers, or on the municipal
certificates of canvass before the provincial board of canvassers or district board of canvassers in Metro
Manila Area, shall be specifically noticed in the minutes of their respective proceedings."

SECTION 39. Section 28 of Republic Act No. 7166 is hereby amended as follows:

"SECTION 28. Canvassing by Provincial, City, District and Municipal Board of Canvassers. -

"a) The city or municipal of board of canvassers shall canvass the election returns of President, Vice
President, Senator and Members of the House of Representatives and for elective provincial and city or
municipal officials: Provided, That the returns for national positions shall be canvassed first. Upon
completion of the canvass, it shall prepare the certificate of canvass for president, vice-president, senators
and members the House of Representatives and elective provincial officials, announce the results of the
election for national positions in the city or municipality, and thereafter, proclaim the elected city or
municipal officials, as the case may be.

"b) The city board of canvassers of cities comprising one or more legislative districts shall canvass the
election returns for president, vice-president, senators, members of the House of Representatives and
elective city officials: Provided, That the returns for national positions shall be canvassed first. Upon
completion of the canvass, the board shall prepare the certificate of canvass of president, vice-president,
and senators, announce the results of the election for national positions in the city, and thereafter, proclaim
the elected members of the House of the Representatives and city officials.

"c)

"(1) In the Metro Manila Area such municipality comprising a legislative district shall have district board
of canvassers which shall canvass the election returns for President, Vice-President, Senators, Members for
the House of Representatives and elective municipal officials: Provided, That the returns for national
positions shall be canvassed first. Upon completion of the canvass, it shall prepare the certificate of canvass
for president, vice-president and senators, announce the results of the election for national positions in the
municipality, and thereafter, proclaim the elected member of the House of the Representatives and
municipal officials.

"(2) Each component municipality in a legislative district in the Metro Manila Area shall have a municipal
board of canvassers which shall canvass the election returns for president, vice-president, senators, member
of the House of Representatives and elective municipal officials: Provided, That the returns for national
positions shall be canvassed first. Upon completion of the canvass, each shall prepare the certificate of

153
canvass for president, vice-president, senators, and members of the House of the Representatives, announce
the results of the election for national positions in the municipality, and thereafter, proclaim the elected
municipal officials.

"(3) The district board of canvassers of each legislative district comprising two municipalities in the Metro
Manila Areas shall canvass the certificate of canvass for President, Vice-President, Senators and Members
of the House of Representatives submitted by the municipal board of canvassers of the component
municipalities. Upon completion of the canvass, it shall prepare a certificate of canvass for president, vice-
president and senators, announce the results of the election for national positions in the district, and
thereafter, proclaim the elected member of the House of the Representatives in the legislative district,

"(d) The provincial board of canvassers shall canvass the certificate of canvass for president, vice-president,
senators, and members of the House of Representatives and elective provincial officials as well as plebiscite
results, if any plebiscite is conducted simultaneously with the same election, as submitted by the board of
canvassers of municipalities and component cities: Provided, That the returns for national positions shall
be canvassed first. Upon completion of the canvass, it shall prepare the certificate of canvass for president,
vice-president, and senators, announce the results of the election for national positions in the province, and
thereafter, proclaim the elected member of the House of Representatives and provincial officials as well as
the plebiscite results, if any.

"In conducting the canvass of election returns or certificates of canvass, as the case may be, the board of
canvassers in a municipality, city, district or province shall project each election return or certificate of
canvass on a wall from which its contents shall be read in order that those present in the canvassing center
may follow the progress of the canvassing process from beginning to end. The Commission may utilize the
appropriate projection equipment for this purpose.

"Immediately after the certificate of canvass for national positions is accomplished, the chairman of the
Board of Canvassers shall announce the posting of the second copy thereof and its supporting statement of
votes on a wall with sufficient lighting within the premises of the canvassing center. He shall then proceed
to do the same in the presence of the other members of the board, the watchers and those present in the
canvassing center. Without delay and when feasible, he shall capture images of the certificate of canvass
and supporting statements of votes using a secured data capturing device and thereafter, while in the
premises of the canvassing center, immediately print the data so captured in thirty (30) copies. The board
of canvassers shall then authenticate each printed copy, in the presence of watchers and within public view,
by closely comparing the same with the certificate of canvass or statement of votes, as the case may be,
posted on of the wall. If the board finds each printed copy a faithful reproduction of the certificate of canvass

154
or statement of votes, all members thereof shall annotate and sign a certification to that effect on the bottom
front of the printed copy.

"Each certified printed copy shall be placed in an envelope and distributed as herein provided. Designated
recipients of the certified printed copies may receive their copies at the canvassing center.

"The chairman of the board shall transmit the digital files of the certificate of canvass and its supporting
statement of votes using a secured transmission device with authentication features to the secured tabulation
system of the Commission and to the systems of the other designated recipients as herein provided.

"Any provision of law to the contrary notwithstanding, any of the recipients of the print or digital copies of
the certificate of canvass and the supporting statements of votes may conduct an unofficial consolidation
of votes and may announce the result thereof to the public.

"Any violation of this section, or its pertinent portion, shall constitute an election offense and shall be
penalized in accordance with Batas Pambansa Blg. 881.

"In addition, the following shall likewise be guilty of an election offense:

"(a) Any person who removes the certificate of canvass posted on the wall, whether within or after the
prescribed forty-eight (48) hours of posting, or defaces the same in any manner;

"(b) Any person who simulates an actual certificates of canvass or statement of votes, or a print or digital
copy thereof;

"(c) Any person who simulates the certification of a certificate of canvass or statement of votes;

"(d) The chairman or any member of the board of canvassers who, during the prescribed period of posting,
removes the certificate of canvass or its supporting statement of votes from the wall on which they have
been posted other than for the purpose of immediately transferring them to a more suitable place;

"(e) The chairman or any member of the board of canvassers who signs or authenticates a print of the
certificate of canvass or its supporting statement of votes outside of the polling place: and

"(f) The chairman or any member of the board of canvassers who signs or authenticates a print which bears
an image different from the certificate of canvass or statement of votes produced after counting and posted
on the wall."

155
SECTION 40. Section 29 of Republic Act No. 7166 is hereby amended to read as follows:

"SECTION29. Number of Copies of Certificates of Canvass and their Distribution. -

a) The certificate of canvass for president, vice-president, senators and members of the House of
Representatives and elective provincial officials shall be prepared in seven copies by the city or municipal
board of canvassers and distributed as follows:

"(1) The first copy shall be delivered to the provincial board of canvassers for use in the canvass election
results for president, vice-president, senators and members of the House of Representatives and elective
provincial officials:

"(2) The second copy shall be sent to the Commission;

"(3) The third copy shall be posted on a wall within the premises of the canvassing center;

"(4) The fourth copy shall be kept by the Chairman of the Board; and

"(5) The fifth copy shall be given the citizens' arm designated by the Commission to conduct a media-based
unofficial count, and the sixth and seventh copies shall be given to the representatives of two of the six
major political parties in accordance with the voluntary agreement of the parties. If no such agreement is
reached, the Commission shall decide which parties shall receive the copies of the certificate of the canvass
on the basis of the criteria provided in Section 26 hereof. The parties receiving the certificates shall have
the obligation to furnish the other parties with authentic copies thereof with the least possible delay.

"b) The certificate of canvass for president, vice-president, senators shall be prepared in seven (7) copies
by the city boards of canvassers of cities comprising one or more legislative districts, by provincial boards
of canvassers and by district boards of canvassers in the Metro Manila Area, and distributed as follows:

"(1) The first copy shall be sent to the Congress, directed to the President of the Senate for use in the canvass
of election results for president and vice-president;

"(2) The second copy shall be sent to the Commission for use in the canvass of the election results for
Senators;

"(3) The third copy shall be posted on a wall within the premises of the canvassing center;

"(4) The fourth copy shall be kept by the Chairman of the Board; and

156
"(5) The fifth copy shall be given to the citizens' arm designated by the Commission to conduct a media-
based unofficial count, and the sixth and seventh copies shall be given to the representatives of two of the
six major political parties in accordance with the voluntary agreement of the parties. If no such agreement
is reached, the Commission shall decide which parties shall receive the copies of the certificate of canvass
on the basis of the criteria provided in Section 26 hereof. The parties receiving the certificates shall have
the obligation to furnish the other parties with authentic copies thereof with the least possible delay.

"The copy of the certificate of canvass posted on the wall shall be open for public viewing at any time of
the day for forty-eight (48) hours following its posting. Any person may view or capture an image of the
certificate of canvass. After the prescribed period for posting, the chairman of the board of canvassers shall
collect the posted certificate of canvass and keep the same in his custody to be produced for image or data
capturing as may be requested by any voter or for any lawful purpose as may be ordered competent
authority.

"Except for those copies that are required to be delivered, copies of certificates of canvass may be claimed
at the canvassing center. Any unclaimed copy shall be deemed placed in the custody of the chairman of the
board of canvassers, who shall produce them when requested by the recipient or when ordered by a
competent authority.

"The thirty (30) certified print copies of the certificate canvass for national positions shall be distributed as
follows:

"(a) The first fourteen (14) copies shall be given to the fourteen (14) accredited major national parties in
accordance with a voluntary agreement among them. If no such agreement is reached, the Commission shall
decide which parties shall receive the copies on the basis of the criteria provided in Section 26 hereof;

"(b) The next three copies shall be given to the three accredited major local parties in accordance with a
voluntary agreement among them. If no such agreement is reached, the Commission shall decide which
parties shall receive the copies in the basis of criteria analogous to that provided in Section 26 hereof;

"(c) The next five copies shall be given to national broadcast or print media entities as may be equitably
determined by the Commission in view of propagating the copies to the widest extent possible;

"(d) The next two copies shall be given to local broadcast or print media entitles as may be equitably
determined by the Commission in view of propagating the copies to the widest extent possible;

157
"(e) The next four copies to the major citizens' arms, including the accredited citizens' arm, and other non-
partisan groups or organizations enlisted by the Commission pursuant to Section 52(k) of Batas Pambansa
Blg. 881; and

(f) The last two copies to be kept in file by the chairman of the board of canvassers to be subsequently
distributed as the national board of canvassers may direct.

"The certified print copies may be claimed at the canvassing center. Any unclaimed copy shall be deemed
place in the custody of the chairman of the board of canvassers, who shall produce them when requested
by the recipient or when ordered by a competent authority.

"The Commission shall post its digital files in its website for the public to view or download at any time of
the day. The Commission shall maintain the files for at least three years from the date of posting.

"Any violation of this section, or its pertinent portion, shall constitute an election offense and shall be
penalized in accordance with Batas Pambansa Blg. 881."

SECTION 41. The first paragraph of SECTION 52 of Batas Pambansa Blg. 881 is hereby amended to read
as follows:

"SECTION 52. Powers and Functions of the Commission on Elections. - In addition to the powers and
functions conferred upon it by the Constitution, the Commission shall have exclusive charge of the
enforcement and administration of all laws relative to the conduct of elections for the purpose of ensuring
free, orderly and honest elections, except as otherwise provided herein and shall:"

SECTION 42. Section 27 (b) of Republic Act No. 6646 is hereby amended to read as follows:

"SECTION 27. Election Offenses; Electoral Sabotage. - In additional to the prohibited acts and election
offenses enumerated in Section 261 and 262 of Batas Pambansa Blg. 881, as amended, the following shall
be guilty of an election offense or a special election offense to be known as electoral sabotage:

"(a) x x x

"(b) Any person or member of the board of election inspectors or board of canvassers who tampers,
increases or decreases the votes received by a candidate in any election or any member of the board who
refuses, after proper verification and hearing, to credit the correct votes or deduct such tampered votes:
Provided, however, That when the tampering, increase or decrease of votes or the refusal to credit the
correct votes and/or to deduct tampered votes to deduct tampered votes are perpetrated on a large scale or

158
in substantial numbers, the same shall be considered, not as an ordinary election offense under
Sections 261 and/or 262 of the Omnibus Election Code, but a special election offense to be known as
electoral sabotage and the penalty to be imposed shall be life imprisonment.

"The act or offense committed shall fall under the category of electoral sabotage in any of the following
instances;

"(1) When the tampering, increase and/or decrease of votes perpetrated or the refusal to credit the correct
votes or to deduct tampered votes, is/are committed in the election of a national elective office which is
voted upon nationwide and the tampering, increase and/or decrease votes, refusal to credit the correct votes
or to deduct tampered votes, shall adversely affect the results of the election to the said national office to
the extent that losing candidate/s is/are made to appear the winner/s;

"(2) Regardless of the elective office involved, when the tampering, increase and/or decrease of votes
committed or the refusal to credit the correct votes or to deduct tampered votes perpetrated, is accomplished
in a single election document or in the transposition of the figures/results from one election document to
another and involved in the said tampering increase and/or decrease or refusal to credit correct votes or
deduct tampered votes exceed five thousand (5,000) votes, and that the same adversely affects the true
results of the election;

"(3) Any and all other forms or tampering increase/s and/or decrease/s of votes perpetuated or in cases of
refusal to credit the correct votes or deduct the tampered votes, where the total votes involved exceed ten
thousand (10,000) votes;

"Provided finally, That any and all either persons or individuals determined to be conspiracy or in
connivance with the members of the BEIs or BOCs involved, shall be meted the same penalty of life
imprisonment."

SECTION 43. Section 265 of Batas Pambansa Blg. 881 is hereby amended to read as follow:

"SECTION 265. Prosecution. - The Commission shall, through its duly authorized legal officers, have the
power, concurrent with the other prosecuting arms of the government, to conduct preliminary investigation
of all election offenses punishable under this Code, and prosecute the same."

SECTION 44. Appropriations. - To carry out the provisions of this Act, the amount necessary for the
automated system shall be charged against the Two billion six hundred million pesos (P2,600,000,000.00)
modernization fund in the current year's appropriations of the Commission. Further, the amount necessary
to carry out the manual system, at a maximum of Three billion pesos (P3,000,000,000) shall be charged
against the current year's appropriation of the Commission.
159
Thereafter, such sums as may be necessary for the continuous implementation of this Act shall be included
in the annual General Appropriations Act.

If the said funds shall not be fully utilized, the same shall continue to be appropriated for the electoral
modernization as set forth in this Act and shall not revert to the General Fund.

SECTION 45. Separability Clause. - If, for any reason, any section or provision of this Act or any part
thereof, or the application of such section, provision or portion is declared invalid or unconstitutional, the
remainder thereof shall not be affected by such declaration.

SECTION 46. Repealing Clause. - All laws, presidential decrees, executive orders, rules and regulations
or part thereof inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

SECTION 47. Effectivity. - This Act Shall take effect fifteen (15) days after its publication in a newspaper
of general circulation.

Approved: 23 January 2007

160
CIVIL LAW

161
R.A. 8552 Domestic Adoption Act of 1998

AN ACT ESTABLISHING THE RULES AND POLICIES ON THE DOMESTIC ADOPTION OF

FILIPINO CHILDREN AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

ARTICLE I
GENERAL PROVISIONS

Section 1. Short Title. This Act shall be known as the "Domestic Adoption Act of 1998."

Section 2. Declaration of Policies. (a) It is hereby declared the policy of the State to ensure that every
child remains under the care and custody of his/her parent(s) and be provided with love, care,
understanding and security towards the full and harmonious development of his/her personality. Only
when such efforts prove insufficient and no appropriate placement or adoption within the child's extended
family is available shall adoption by an unrelated person be considered.

(b) In all matters relating to the care, custody and adoption of a child, his/her interest shall be the
paramount consideration in accordance with the tenets set forth in the United Nations (UN) Convention
on the Rights of the Child; UN Declaration on Social and Legal Principles Relating to the Protection and
Welfare of Children with Special Reference to Foster Placement and Adoption, Nationally and
Internationally; and the Hague Convention on the Protection of Children and Cooperation in Respect of
Intercountry Adoption. Toward this end, the State shall provide alternative protection and assistance
through foster care or adoption for every child who is neglected, orphaned, or abandoned.

(c) It shall also be a State policy to:

(i) Safeguard the biological parent(s) from making hurried decisions to relinquish his/her parental
authority over his/her child;

(ii) Prevent the child from unnecessary separation from his/her biological parent(s);

(iii) Protect adoptive parent(s) from attempts to disturb his/her parental authority and custody
over his/her adopted child.

Any voluntary or involuntary termination of parental authority shall be administratively or

judicially declared so as to establish the status of the child as "legally available for adoption" and
his/her custody transferred to the Department of Social Welfare and Development or to any duly
licensed and accredited child-placing or child-caring agency, which entity shall be authorized to
take steps for the permanent placement of the child;

(iv) Conduct public information and educational campaigns to promote a positive environment
for adoption;

(v) Ensure that sufficient capacity exists within government and private sector agencies to handle
adoption inquiries, process domestic adoption applications, and offer adoption-related services
including, but not limited to, parent preparation and post-adoption education and counseling; and

162
 (vi) Encourage domestic adoption so as to preserve the child's identity and culture in his/her
native land, and only when this is not available shall intercountry adoption be considered as a last
resort.

Section 3. Definition of Terms. For purposes of this Act, the following terms shall be defined as:

(a) "Child" is a person below eighteen (18) years of age.

(b) "A child legally available for adoption" refers to a child who has been voluntarily or
involuntarily committed to the Department or to a duly licensed and accredited child-placing or
child-caring agency, freed of the parental authority of his/her biological parent(s) or guardian or
adopter(s) in case of rescission of adoption.

(c) "Voluntarily committed child" is one whose parent(s) knowingly and willingly relinquishes
parental authority to the Department.

(d) "Involuntarily committed child" is one whose parent(s), known or unknown, has been
permanently and judicially deprived of parental authority due to abandonment; substantial,
continuous, or repeated neglect; abuse; or incompetence to discharge parental responsibilities.

(e) "Abandoned child" refers to one who has no proper parental care or guardianship or whose
parent(s) has deserted him/her for a period of at least six (6) continuous months and has been
judicially declared as such.

(f) "Supervised trial custody" is a period of time within which a social worker oversees the
adjustment and emotional readiness of both adopter(s) and adoptee in stabilizing their filial
relationship.

(g) "Department" refers to the Department of Social Welfare and Development.

(h) "Child-placing agency" is a duly licensed and accredited agency by the Department to provide
comprehensive child welfare services including, but not limited to, receiving applications for
adoption, evaluating the prospective adoptive parents, and preparing the adoption home study.

(i) "Child-caring agency" is a duly licensed and accredited agency by the Department that
provides twenty four (24)-hour residential care services for abandoned, orphaned, neglected, or
voluntarily committed children.

(j) "Simulation of birth" is the tampering of the civil registry making it appear in the birth records
that a certain child was born to a person who is not his/her biological mother, causing such child
to lose his/her true identity and status.

ARTICLE II
PRE-ADOPTION SERVICES

Section 4. Counseling Service. The Department shall provide the services of licensed social workers to
the following:

163
 (a) Biological Parent(s) Counseling shall be provided to the parent(s) before and after the birth
of his/her child. No binding commitment to an adoption plan shall be permitted before the birth of
his/her child. A period of six (6) months shall be allowed for the biological parent(s) to reconsider
any decision to relinquish his/her child for adoption before the decision becomes irrevocable.
Counseling and rehabilitation services shall also be offered to the biological parent(s) after he/she
has relinquished his/her child for adoption.

Steps shall be taken by the Department to ensure that no hurried decisions are made and all
alternatives for the child's future and the implications of each alternative have been provided.

(b) Prospective Adoptive Parent(s) Counseling sessions, adoption fora and seminars, among
others, shall be provided to prospective adoptive parent(s) to resolve possible adoption issues and
to prepare him/her for effective parenting.

(c) Prospective Adoptee Counseling sessions shall be provided to ensure that he/she
understands the nature and effects of adoption and is able to express his/her views on adoption in
accordance with his/her age and level of maturity.

Section 5. Location of Unknown Parent(s). It shall be the duty of the Department or the child-placing
or child-caring agency which has custody of the child to exert all efforts to locate his/her unknown
biological parent(s). If such efforts fail, the child shall be registered as a foundling and subsequently be
the subject of legal proceedings where he/she shall be declared abandoned.

Section 6. Support Services. The Department shall develop a pre-adoption program which shall
include, among others, the above mentioned services.

ARTICLE III
ELIGIBILITY

Section 7. Who May Adopt. The following may adopt:

(a) Any Filipino citizen of legal age, in possession of full civil capacity and legal rights, of good
moral character, has not been convicted of any crime involving moral turpitude, emotionally and
psychologically capable of caring for children, at least sixteen (16) years older than the adoptee,
and who is in a position to support and care for his/her children in keeping with the means of the
family. The requirement of sixteen (16) year difference between the age of the adopter and
adoptee may be waived when the adopter is the biological parent of the adoptee, or is the spouse
of the adoptee's parent;

(b) Any alien possessing the same qualifications as above stated for Filipino nationals: Provided,
That his/her country has diplomatic relations with the Republic of the Philippines, that he/she has
been living in the Philippines for at least three (3) continuous years prior to the filing of the
application for adoption and maintains such residence until the adoption decree is entered, that
he/she has been certified by his/her diplomatic or consular office or any appropriate government
agency that he/she has the legal capacity to adopt in his/her country, and that his/her government
allows the adoptee to enter his/her country as his/her adopted son/daughter: Provided,
Further, That the requirements on residency and certification of the alien's qualification to adopt
in his/her country may be waived for the following:

164
 (i) a former Filipino citizen who seeks to adopt a relative within the fourth (4th) degree of
consanguinity or affinity; or

(ii) one who seeks to adopt the legitimate son/daughter of his/her Filipino spouse; or

(iii) one who is married to a Filipino citizen and seeks to adopt jointly with his/her spouse
a relative within the fourth (4th) degree of consanguinity or affinity of the Filipino
spouse; or

(c) The guardian with respect to the ward after the termination of the guardianship and clearance
of his/her financial accountabilities.

Husband and wife shall jointly adopt, except in the following cases:

(i) if one spouse seeks to adopt the legitimate son/daughter of the other; or

(ii) if one spouse seeks to adopt his/her own illegitimate son/daughter: Provided, However, that
the other spouse has signified his/her consent thereto; or

(iii) if the spouses are legally separated from each other.

In case husband and wife jointly adopt, or one spouse adopts the illegitimate son/daughter of the other,
joint parental authority shall be exercised by the spouses.

Section 8. Who May Be Adopted. The following may be adopted:

(a) Any person below eighteen (18) years of age who has been administratively or judicially
declared available for adoption;

(b) The legitimate son/daughter of one spouse by the other spouse;

(c) An illegitimate son/daughter by a qualified adopter to improve his/her status to that of

legitimacy;

(d) A person of legal age if, prior to the adoption, said person has been consistently considered
and treated by the adopter(s) as his/her own child since minority;

(e) A child whose adoption has been previously rescinded; or

(f) A child whose biological or adoptive parent(s) has died: Provided, That no proceedings shall
be initiated within six (6) months from the time of death of said parent(s).

Section 9. Whose Consent is Necessary to the Adoption. After being properly counseled and informed
of his/her right to give or withhold his/her approval of the adoption, the written consent of the following
to the adoption is hereby required:

(a) The adoptee, if ten (10) years of age or over;

165
 (b) The biological parent(s) of the child, if known, or the legal guardian, or the proper
government instrumentality which has legal custody of the child;

(c) The legitimate and adopted sons/daughters, ten (10) years of age or over, of the adopter(s) and
adoptee, if any;

(d) The illegitimate sons/daughters, ten (10) years of age or over, of the adopter if living with said
adopter and the latter's spouse, if any; and

(e) The spouse, if any, of the person adopting or to be adopted.

ARTICLE IV
PROCEDURE

Section 10. Hurried Decisions. In all proceedings for adoption, the court shall require proof that the
biological parent(s) has been properly counseled to prevent him/her from making hurried decisions
caused by strain or anxiety to give up the child, and to sustain that all measures to strengthen the family
have been exhausted and that any prolonged stay of the child in his/her own home will be inimical to
his/her welfare and interest.

Section 11. Case Study. No petition for adoption shall be set for hearing unless a licensed social worker
of the Department, the social service office of the local government unit, or any child-placing or child-
caring agency has made a case study of the adoptee, his/her biological parent(s), as well as the adopter(s),
and has submitted the report and recommendations on the matter to the court hearing such petition.

At the time of preparation of the adoptee's case study, the concerned social worker shall confirm with the
Civil Registry the real identity and registered name of the adoptee. If the birth of the adoptee was not
registered with the Civil Registry, it shall be the responsibility of the concerned social worker to ensure
that the adoptee is registered.

The case study on the adoptee shall establish that he/she is legally available for adoption and that the
documents to support this fact are valid and authentic. Further, the case study of the adopter(s) shall
ascertain his/her genuine intentions and that the adoption is in the best interest of the child.

The Department shall intervene on behalf of the adoptee if it finds, after the conduct of the case studies,
that the petition should be denied. The case studies and other relevant documents and records pertaining
to the adoptee and the adoption shall be preserved by the Department.

Section 12. Supervised Trial Custody. No petition for adoption shall be finally granted until the
adopter(s) has been given by the court a supervised trial custody period for at least six (6) months within
which the parties are expected to adjust psychologically and emotionally to each other and establish a
bonding relationship. During said period, temporary parental authority shall be vested in the adopter(s).

The court may motu proprio or upon motion of any party reduce the trial period if it finds the same to be
in the best interest of the adoptee, stating the reasons for the reduction of the period. However, for alien
adopter(s), he/she must complete the six (6)-month trial custody except for those enumerated in Sec. 7 (b)
(i) (ii) (iii).

166
If the child is below seven (7) years of age and is placed with the prospective adopter(s) through a pre-
adoption placement authority issued by the Department, the prospective adopter(s) shall enjoy all the
benefits to which biological parent(s) is entitled from the date the adoptee is placed with the prospective
adopter(s).

Section 13. Decree of Adoption. If, after the publication of the order of hearing has been complied with,
and no opposition has been interposed to the petition, and after consideration of the case studies, the
qualifications of the adopter(s), trial custody report and the evidence submitted, the court is convinced
that the petitioners are qualified to adopt, and that the adoption would redound to the best interest of the
adoptee, a decree of adoption shall be entered which shall be effective as of the date the original petition
was filed. This provision shall also apply in case the petitioner(s) dies before the issuance of the decree of
adoption to protect the interest of the adoptee. The decree shall state the name by which the child is to be
known.

Section 14. Civil Registry Record. An amended certificate of birth shall be issued by the Civil Registry,
as required by the Rules of Court, attesting to the fact that the adoptee is the child of the adopter(s) by
being registered with his/her surname. The original certificate of birth shall be stamped "cancelled" with
the annotation of the issuance of an amended birth certificate in its place and shall be sealed in the civil
registry records. The new birth certificate to be issued to the adoptee shall not bear any notation that it is
an amended issue.

Section 15. Confidential Nature of Proceedings and Records. All hearings in adoption cases shall be
confidential and shall not be open to the public. All records, books, and papers relating to the adoption
cases in the files of the court, the Department, or any other agency or institution participating in the
adoption proceedings shall be kept strictly confidential.

If the court finds that the disclosure of the information to a third person is necessary for purposes
connected with or arising out of the adoption and will be for the best interest of the adoptee, the court may
merit the necessary information to be released, restricting the purposes for which it may be used.

ARTICLE V
EFFECTS OF ADOPTION

Section 16. Parental Authority. Except in cases where the biological parent is the spouse of the
adopter, all legal ties between the biological parent(s) and the adoptee shall be severed and the same shall
then be vested on the adopter(s).

Section 17. Legitimacy. The adoptee shall be considered the legitimate son/daughter of the adopter(s)
for all intents and purposes and as such is entitled to all the rights and obligations provided by law to
legitimate sons/daughters born to them without discrimination of any kind. To this end, the adoptee is
entitled to love, guidance, and support in keeping with the means of the family.

Section 18. Succession. In legal and intestate succession, the adopter(s) and the adoptee shall have
reciprocal rights of succession without distinction from legitimate filiation. However, if the adoptee and
his/her biological parent(s) had left a will, the law on testamentary succession shall govern.

ARTICLE VI
RESCISSION OF ADOPTION

167
Section 19. Grounds for Rescission of Adoption. Upon petition of the adoptee, with the assistance of
the Department if a minor or if over eighteen (18) years of age but is incapacitated, as guardian/counsel,
the adoption may be rescinded on any of the following grounds committed by the adopter(s): (a) repeated
physical and verbal maltreatment by the adopter(s) despite having undergone counseling; (b) attempt on
the life of the adoptee; (c) sexual assault or violence; or (d) abandonment and failure to comply with
parental obligations.

Adoption, being in the best interest of the child, shall not be subject to rescission by the adopter(s).
However, the adopter(s) may disinherit the adoptee for causes provided in Article 919 of the Civil Code.

Section 20. Effects of Rescission. If the petition is granted, the parental authority of the adoptee's
biological parent(s), if known, or the legal custody of the Department shall be restored if the adoptee is
still a minor or incapacitated. The reciprocal rights and obligations of the adopter(s) and the adoptee to
each other shall be extinguished.

The court shall order the Civil Registrar to cancel the amended certificate of birth of the adoptee and
restore his/her original birth certificate.

Succession rights shall revert to its status prior to adoption, but only as of the date of judgment of judicial
rescission. Vested rights acquired prior to judicial rescission shall be respected.

All the foregoing effects of rescission of adoption shall be without prejudice to the penalties imposable
under the Penal Code if the criminal acts are properly proven.

ARTICLE VII
VIOLATIONS AND PENALTIES

Section 21. Violations and Penalties. (a) The penalty of imprisonment ranging from six (6) years and
one (1) day to twelve (12) years and/or a fine not less than Fifty thousand pesos (P50,000.00), but not
more than Two hundred thousand pesos (P200,000.00) at the discretion of the court shall be imposed on
any person who shall commit any of the following acts:

(i) obtaining consent for an adoption through coercion, undue influence, fraud, improper material
inducement, or other similar acts;

(ii) non-compliance with the procedures and safeguards provided by the law for adoption; or

(iii) subjecting or exposing the child to be adopted to danger, abuse, or exploitation.

(b) Any person who shall cause the fictitious registration of the birth of a child under the name(s) of a
person(s) who is not his/her biological parent(s) shall be guilty of simulation of birth, and shall be
punished by prision mayor in its medium period and a fine not exceeding Fifty thousand pesos
(P50,000.00).

Any physician or nurse or hospital personnel who, in violation of his/her oath of office, shall cooperate in
the execution of the abovementioned crime shall suffer the penalties herein prescribed and also the
penalty of permanent disqualification.

168
Any person who shall violate established regulations relating to the confidentiality and integrity of
records, documents, and communications of adoption applications, cases, and processes shall suffer the
penalty of imprisonment ranging from one (1) year and one (1) day to two (2) years, and/or a fine of not
less than Five thousand pesos (P5,000.00) but not more than Ten thousand pesos (P10,000.00), at the
discretion of the court.

A penalty lower by two (2) degrees than that prescribed for the consummated offense under this Article
shall be imposed upon the principals of the attempt to commit any of the acts herein enumerated. Acts
punishable under this Article, when committed by a syndicate or where it involves two (2) or more
children shall be considered as an offense constituting child trafficking and shall merit the penalty
of reclusion perpetua.

Acts punishable under this Article are deemed committed by a syndicate if carried out by a group of three
(3) or more persons conspiring and/or confederating with one another in carrying out any of the unlawful
acts defined under this Article. Penalties as are herein provided, shall be in addition to any other penalties
which may be imposed for the same acts punishable under other laws, ordinances, executive orders, and
proclamations.

When the offender is an alien, he/she shall be deported immediately after service of sentence and
perpetually excluded from entry to the country.

Any government official, employee or functionary who shall be found guilty of violating any of the
provisions of this Act, or who shall conspire with private individuals shall, in addition to the above-
prescribed penalties, be penalized in accordance with existing civil service laws, rules and
regulations: Provided, That upon the filing of a case, either administrative or criminal, said government
official, employee, or functionary concerned shall automatically suffer suspension until the resolution of
the case.

Section 22. Rectification of Simulated Births. A person who has, prior to the effectivity of this Act,
simulated the birth of a child shall not be punished for such act: Provided, That the simulation of birth
was made for the best interest of the child and that he/she has been consistently considered and treated by
that person as his/her own son/daughter: Provided, further, That the application for correction of the birth
registration and petition for adoption shall be filed within five (5) years from the effectivity of this Act
and completed thereafter: Provided, finally, That such person complies with the procedure as specified in
Article IV of this Act and other requirements as determined by the Department.

ARTICLE VIII
FINAL PROVISIONS

Section 23. Adoption Resource and Referral Office. There shall be established an Adoption Resources
and Referral Office under the Department with the following functions: (a) monitor the existence,
number, and flow of children legally available for adoption and prospective adopter(s) so as to facilitate
their matching; (b) maintain a nationwide information and educational campaign on domestic adoption;
(c) keep records of adoption proceedings; (d) generate resources to help child-caring and child-placing
agencies and foster homes maintain viability; and (e) do policy research in collaboration with the
Intercountry Adoption Board and other concerned agencies. The office shall be manned by adoption
experts from the public and private sectors.

Section 24. Implementing Rules and Regulations. Within six (6) months from the promulgation of this
Act, the Department, with the Council for the Welfare of Children, the Office of Civil Registry General,

169
the Department of Justice, Office of the Solicitor General, and two (2) private individuals representing
child-placing and child-caring agencies shall formulate the necessary guidelines to make the provisions of
this Act operative.

Section 25. Appropriations. Such sum as may be necessary for the implementation of the provisions of
this Act shall be included in the General Appropriations Act of the year following its enactment into law
and thereafter.

Section 26. Repealing Clause. Any law, presidential decree or issuance, executive order, letter of
instruction, administrative order, rule, or regulation contrary to, or inconsistent with the provisions of this
Act is hereby repealed, modified, or amended accordingly.

Section 27. Separability Clause. If any provision of this Act is held invalid or unconstitutional, the
other provisions not affected thereby shall remain valid and subsisting.

Section 28. Effectivity Clause. This Act shall take effect fifteen (15) days following its complete
publication in any newspaper of general circulation or in the Official Gazette.

Approved: February 25, 1998

170
R.A. 7610 - Special Protection of Children Against Abuse, Exploitation and Discrimination
Act

ARTICLE VI
Other Acts of Abuse

Section 10. Other Acts of Neglect, Abuse, Cruelty or Exploitation and Other Conditions Prejudicial to
the Child's Development.

(c) Any person who shall induce, deliver or offer a minor to any one prohibited by this Act to keep or
have in his company a minor as provided in the preceding paragraph shall suffer the penalty of prision
mayor in its medium period and a fine of not less than Forty thousand pesos (P40,000); Provided,
however, That should the perpetrator be an ascendant, stepparent or guardian of the minor, the penalty to
be imposed shall be prision mayor in its maximum period, a fine of not less than Fifty thousand pesos
(P50,000), and the loss of parental authority over the minor.

171
R.A. 9255

AN ACT ALLOWING ILLEGITIMATE CHILDREN TO USE THE SURNAME OF THEIR

FATHER, AMENDING FOR THE PURPOSE ARTICLE 176 OF EXECUTIVE ORDER NO. 209,
OTHERWISE KNOWN AS THE "FAMILY CODE OF THE PHILIPPINES"

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Article 176 of Executive Order No. 209, otherwise known as the Family Code of the
Philippines, is hereby amended to read as follows:

"Article 176. Illegitimate children shall use the surname and shall be under the parental authority
of their mother, and shall be entitled to support in conformity with this Code. However,
illegitimate children may use the surname of their father if their filiation has been expressly
recognized by the father through the record of birth appearing in the civil register, or when an
admission in a public document or private handwritten instrument is made by the
father. Provided, the father has the right to institute an action before the regular courts to prove
non-filiation during his lifetime. The legitime of each illegitimate child shall consist of one-half
of the legitime of a legitimate child."

SECTION 2. Repealing Clause. All laws, presidential decrees, executive orders, proclamations, rules
and regulations, which are inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

SECTION 3. Effectivity Clause. This Act shall take effect fifteen (15) days from its publication in
the Official Gazette or in two (2) newspapers of general circulation.

Approved,

FRANKLIN DRILON JOSE DE VENECIA JR.

President of the Senate Speaker of the House of
Representatives

This Act which is a consolidation of House Bill No. 4437 and Senate Bill No. 2510 was finally passed by
the House of Representatives and the Senate on January 21, 2004 and February 4, 2004, respectively.

OSCAR G. YABES ROBERTO P. NAZARENO

Secretary of Senate Secretary General
House of Represenatives

Approved: February 24 2004

GLORIA MACAPAGAL-ARROYO
President of the Philippines

172
Art. 1484 of the Civil Code (RECTO LAW)

Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the
vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's
failure to pay cover two or more installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

173
R.A. 6552 Realty Installment Buyer Act (MACEDA LAW)

AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT

PAYMENTS. (Rep. Act No. 6552)

Section 1. This Act shall be known as the "Realty Installment Buyer Act."

Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments
against onerous and oppressive conditions.

Section 3. In all transactions or contracts involving the sale or financing of real estate on installment
payments, including residential condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four, as amended
by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years
of installments, the buyer is entitled to the following rights in case he defaults in the payment of
succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period
earned by him which is hereby fixed at the rate of one month grace period for every one year of
installment payments made: Provided, That this right shall be exercised by the buyer only once in
every five years of the life of the contract and its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the
payments on the property equivalent to fifty per cent of the total payments made, and, after five
years of installments, an additional five per cent every year but not to exceed ninety per cent of
the total payments made: Provided, That the actual cancellation of the contract shall take place
after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash surrender value to
the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total
number of installment payments made.lawphi1

Section 4. In case where less than two years of installments were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the
contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.

Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to
another person or to reinstate the contract by updating the account during the grace period and before
actual cancellation of the contract. The deed of sale or assignment shall be done by notarial act.

Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of
the purchase price any time without interest and to have such full payment of the purchase price annotated
in the certificate of title covering the property.

174
Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3,
4, 5 and 6, shall be null and void.

Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be
affected thereby.

Section 9. This Act shall take effect upon its approval.

Approved: August 26, 1972.

175
R.A. 10142 Financial Rehabilitation and Insolvency Act of 2010 (FRIA)

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

176
Republic Act No. 1125 - An Act Creating the Court of Tax Appeals

June 16, 1954

AN ACT CREATING THE COURT OF TAX APPEALS

Section 1. Court; Judges; qualifications; salary; tenure. - There is hereby created a Court of Tax
Appeals which shall consist of a Presiding Judge and two Associate Judges, each of whom shall be
appointed by the President, with the consent of the Commission on Appointments. The Presiding Judge
shall be so designated in the commission issued to him by the President, and the Associate Judges shall
have precedence according to the date o their commissions. The Presiding Judge shall receive a
compensation of thirteen thousand pesos per annum and shall have the same qualifications, rank, category
and privileges as the Presiding Judge of the Court of Industrial Relations. The Associate Judges shall each
receive a compensation of twelve thousand pesos per annum and shall have the same qualifications, rank,
category and privileges as a member of the Court of Industrial Relations. The Presiding Judge and the
Associate Judges shall be appointed to hold office during good behavior, until they reach the age of
seventy, or become incapacitated to discharge the duties of their office, unless sooner removed for the
same causes and in the same manner provided by law for members of the judiciary of appellate rank.

Section 2. Quorum; temporary vacancy. - Any two Judges of the Court of Tax Appeals shall constitute a
quorum, and the concurrence of two judges shall be necessary to promulgate any decision thereof. In case
of temporary vacancy, disability or disqualification, for any reason, of any of the judges of the said Court,
the President may, upon the request of the Presiding Judge, designate any Judge of First Instance to act in
his place; and such Judge of First Instance shall be duly qualified to act as such.

Section 3. Clerk of court; appointment; qualification; compensation. - The Court of Tax Appeals shall
have the Clerk of Court who shall be appointed by the President with the consent of the Commission on
Appointments. No person shall be appointed Clerk of Court unless he is duly authorized to practice law in
the Philippines. The Clerk of Court shall exercise the same powers and perform the same duties in regard
to all matters within the court's jurisdiction, as are exercise and performed by clerks of Court of First
Instance, in so far of those powers and the performance of those duties the clerk shall be under the
direction of the said court. The Clerk of Court shall receive a compensation of six thousand pesos per
annum.

Section 4. Other subordinate employees. - The Court of Tax Appeals shall appoint, in accordance with
the Civil Service Law, rules and regulations, the necessary personnel to assist it in the performance of its
duties. The said Court shall fix their salaries and prescribe their duties.

Section 5. Disqualifications. - No judge or other officer or employee of the Court of Tax Appeals shall
intervene, directly or indirectly, in the management or control of any private enterprise which in any way
may be affected by the functions of the Court. Judges of the said Court shall be disqualified from sitting
in any case on the same grounds provided under Rule one hundred twenty-six of the Rules of Court for
the disqualification of judicial officers. No person who has once serviced in the Court in a permanent
capacity, either as Presiding Judge or as Associated Judge thereof, shall be qualified to practice as counsel
before the Court for a period of one year from his separation therefrom for any cause.

Section 6. Place of office. - The Court of Tax Appeals shall have its office in the City of Manila, and
shall hold hearings at such time and place as it may, by order in writing, designate with a view to assuring
a reasonable opportunity for taxpayers to appear with a little inconvenience and expense as practicable.

177
Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to
review by appeal, as herein provided.

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or
other matters arising under the National Internal Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue;

(2) Decisions of the Commissioner of Customs in cases involving liability for customs duties,
fees or other money charges; seizure, detention or release of property affected fines, forfeitures or
other penalties imposed in relation thereto; or other matters arising under the Customs Law or
other law or part of law administered by the Bureau of Customs; and

(3) Decisions of provincial or city Boards of Assessment Appeals in cases involving the
assessment and taxation of real property or other matters arising under the Assessment Law,
including rules and regulations relative thereto.

Section 8. Court of record; seal; proceedings. - The Court of Tax Appeals shall be a court of record and
shall have a seal which shall be judicially noticed. It shall prescribe the form of its writs and other
processes. It shall have the power to promulgate rules and regulations for the conduct of the business of
the Court, and as may be needful for the uniformity of decisions within its jurisdiction as conferred by
law, but such proceedings shall not be governed strictly by technical rules of evidence.

Section 9. Fees. - The Court shall fix reasonable fees for the filing of an appeal, for certified copies of
any transcript of record, entry or other document, and for other authorized services rendered by the Court
or its personnel.

Section 10. Power to administer oaths; issue subpoena; punish for contempt. - The Court shall have the
power to administer oaths, receive evidence, summon witnesses by subpoena and require the production
of papers or documents by subpoena duce tecum, subject in all respects to the same restrictions and
qualifications as apply in judicial proceedings of a similar nature. The Court shall, in accordance with
Rule sixty-four for the Rules of Court, have the power to punish for contempt for the same causes, under
the same procedure and with the same penalties provided therein.

Section 11. Who may appeal; effect of appeal. - Any person association or corporation adversely
affected by a decision or ruling of the Collector of Internal Revenue, the Collector of Customs or any
provincial or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within
thirty days after the receipt of such decision or ruling.

No appeal taken by the Court of Appeals from the decision of the Collector of Internal Revenue or the
Collector of Customs shall suspend the payment, levy, distraint, and or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing law; Provided, however, That when
in the opinion of the Court the collection by the Bureau of Internal Revenue or the Commissioner of
Customs may jeopardize the interest of the Government and/or the taxpayer the Court at any stage of the
proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed
or to file a surety bond for not more than double the amount with the Court;

Section 12. Taking of evidence. - The Court may, upon proper motion on or its initiative, direct that a
case, or any issue thereof, be assigned to one of its members for the taking of evidence, when the
determination of a question of fact arises upon motion or otherwise in any stage of the proceedings, or

178
when the taking of an account is necessary, or when the determination of an issue of fact requires the
examination of a long account. The hearing before such member shall proceed in all respects as though
the same had been made before the Court.

Upon the recommendation of such hearing such member, he shall promptly submit to the Court his report
in writing, stating his findings and conclusions; and thereafter, the Court shall render its decisions on the
case, adopting, modifying, or rejecting the report in whole or in part, as the case may be, or the Court
may, in its discretion recommit it with instructions, or receive further evidence.

Section 13. Decision. - Cases brought before the Court shall be decided within thirty days after the
submission thereof for decision. Decisions of the Court shall be in writing, stating clearly and distinctly
the facts and the law on which they are based, and signed by the judges concurring therein. The Court
shall provide for the publication of its decisions in the Official Gazette in such form and manner as may
best be adopted for public information and use.

As in the case of judicial officers under section one hundred twenty-nine of the Administrative Code, the
judges of the Court shall each certify on their applications for leave, and upon salary vouchers presented
by them for payment, or upon the payrolls under which their salaries are paid, that all proceedings,
petitions and motions which have been submitted to the Court for determination or decision for a period
of thirty days or more have been determined or decided by the Court on or before the date of making the
certificate, and no leave shall be granted and no salary shall be paid without such certificate.

Section 14. Effect of decision that tax is barred by statute of limitations. - If the assessment or collection
of any tax is barred by any statute of limitations, the decisions of the Court that effect shall be considered
as its decision that there is no deficiency in respect of such tax.

Section 15. Publicity of proceedings and publication of decisions. - All decisions of, and all evidence
received by the Court and its divisions, including transcript of stenographic reports of the hearings, shall
be public records open to the inspection of the public, except that after the decision of the Court in any
proceedings has become final the Court may, upon motion of the taxpayer or the Government permit the
withdrawal, by the part entitled thereto of originals of books, documents and records, and or models,
diagrams, and other exhibits, introduced in evidence before the Court or any division; or the Court may,
on its own motion, make such other disposition thereof as it deems advisable. The Court shall provide for
the publication of its decisions in the Official Gazette in such form and manner as may be best adopted
for public information and use.

Section 16. Damages. - Where an appeal is found to be frivolous, or that proceedings have been instituted
merely for delay, the Court may assess damage against the appellants in an amount not exceeding five
hundred pesos, which shall be collected in the same manner as fines or other penalties authorized by law.

Section 17. Violation of penal law. - When, in the performance of its functions, it should appear to the
Court that a crime or other violation of law has been committed, or, that there are reasonable grounds to
believe that any official, employee or private person is guilty of any crime, offense or other violation, the
Court shall refer the matter to the proper department, bureau or office for investigation or the institution
of such criminal or administrative action as the facts and circumstances of the case may warrant.

Section 18. Appeal to the Supreme Court. - No judicial proceeding against the Government involving
matters arising under the National Internal Revenue Code, the Customs Law or the Assessment Law shall
be maintained, except as herein provided, until and unless an appeal has been previously filed with the
Court of Tax Appeals and disposed of in accordance with the provisions of this Act.

179
Any party adversely affected by any ruling, order or decision of the Court of tax Appeals may appeal
therefrom to the Supreme Court by filing with the said Court a notice of appeal and with the Supreme
Court a petition for review, within thirty days from the date he receives notice of said ruling, order or
decision. If, within the aforesaid period, he fails to perfect his appeal, the said ruling, order or decision
shall become final and conclusive against him

If no decision is rendered by the Court within thirty days from the date a case is submitted for decision,
the party adversely affected by said ruling, order or decision may file with said Court a notice of his
intention to appeal to the Supreme Court, and if, within thirty days from the filing of said notice of
intention to appeal, no decision has as yet been rendered by the Court, the aggrieved party may file
directly with the Supreme Court an appeal from said ruling, order or decision, notwithstanding the
foregoing provisions of this section.

If any ruling, order or decision of the Court of Tax Appeals be adverse to the Government, the Collector
of Internal Revenue, the Commissioner of Customs, or the provincial or city Board of Assessment
Appeals concerned may likewise file an appeal therefrom to the Supreme Court in the manner and within
the same period as above prescribed for private parties.

Any proceeding directly affecting any ruling, order or decision of the Court of Tax Appeals shall have
preference over all other civil proceedings except habeas corpus, workmen's compensation and election
cases.

Section 19. Review by certiorari. - Any ruling, order or decision of the Court of Tax Appeals may
likewise be reviewed by the Supreme Court upon a writ of certiorari in proper cases. Proceedings in the
Supreme Court upon a writ of certiorari or a petition for review, as the case may be, shall be in
accordance with the provisions of the Rules of Court or such rules as the Supreme Court may prescribe.

Section 20. Appropriation. - The sum of seventy-thousand pesos is hereby appropriated out of any funds
in the National Treasury not otherwise appropriated for the salaries and the purchase of supplies and
equipment necessary for the operation of the Court of Tax Appeals herein established during the current
fiscal year. Thereafter the funds necessary for the operation of the Court shall be included in the regular
Appropriation Act.

Section 21. General provisions. - Whenever the words "Board of Tax Appeals" are used in
Commonwealth Act Numbered Four hundred and seventy, otherwise known as the Assessment Law, or in
other laws, rules and regulations relative thereto, the same shall read "Board of Assessment Appeals."

The Central Board of Tax Appeals created under section two of Commonwealth Act Numbered Five
hundred and thirty is hereby abolished.

Executive Order Numbered Four hundred and one-A, dated the fifth of January, nineteen hundred and
fifty- one, is repealed and the Board of Tax Appeals created therein, abolished: Provided, however, That
all cases heretofore decided by the said Board of Tax Appeals and thence appealed to the Supreme Court
pursuant to Executive Order Numbered Four hundred one-A shall be decided by the Supreme Court on
the merits to all intents and purposes as if said Executive Order has been duly enacted by the Congress:
And, Provided, further, That all cases now pending in the said Board of Tax Appeals shall be transferred
to the Court of Tax Appeals and shall be heard and decided by the latter to all intents and purposes as if
they had been originally filed therein.

180
Any law or part of law, or any executive order, rule or regulation or part thereon, inconsistent with the
provisions of this Act is hereby repealed.

Section 22. Pending cases to be remanded to Court. - All cases involving disputed assessment of
Internal Revenue taxes or customs duties pending determination before the Court of First Instance shall
be certified and remanded by the respective clerk of court to the Court of Tax Appeals for final
disposition thereof.

Section 23. Separability Clause. - If any clause, sentence, paragraph or part of this act shall be adjudged
by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate
the remainder of this Act, but shall confined in its operations to the clause, sentence, paragraph or part
thereof directly involved in the controversy.

Section 24. This Act shall take effect upon its approval.

Approved: June 16, 1954

Republic Act No. 9503 June 12, 2008

Further amending Sec. 1 and 2 of RA 1125

AN ACT ENLARGING THE ORGANIZATIONAL STRUCTURE OF THE COURT OF TAX

APPEALS, AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF THE LAW
CREATING THE COURT OF TAX APPEALS, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

SECTION 1. Section 1 of Republic Act No. 1125, as amended, is hereby further amended to read as
follows:

"SECTION 1. Court; Justices, Qualifications; Salary; Tenure. - There is hereby created a Court
of Tax Appeals (CTA) which shall be of the same level as the Court of Appeals, possessing all
the inherent powers of a Court of Justice, and shall consist of a Presiding Justice and eight (8)
Associate Justices. The incumbent Presiding Judge and Associate Judges shall continue in office
and bear the new titles of Presiding Justice and Associate Justices. The Presiding Justices and the
two (2) most Senior Associate Justices, all of whom are incumbent, shall serve as chairmen of the
three (3) Divisions. The other three (3) incumbent Associate Justices and the three (3) additional
Associate Justices shall serve as members of the Divisions. The additional three (3) Justices as
provided herein and the succeeding members of the Court shall be appointed by the President
upon nomination by the Judicial and Bar Council. The Presiding Justice shall be so designated in
his appointment, and the Associate Justices shall have precedence according to the date of their
respective appointment or when the appointments of two (2) or more of them shall bear the same
date, according to the order in which their appointments were issued by the President. They shall
have the same qualifications, rank, category, salary, emoluments and other privileges, be subject
to the same inhibitions and disqualifications, and enjoy the same retirement and other benefits as
those provided for under existing laws for the Presiding Justice and Associate Justices of the
Court of Appeals.

"Whenever the salaries of the Presiding Justice and the Associate Justices of the Court of Appeals
are increased, such increases in salaries shall be deemed correspondingly extended to and enjoyed
by the Presiding Justice and Associate Justices of the CTA.

181
 "The Presiding Justice and Associate Justices shall hold office during good behavior, until they
reach the age of seventy (70), or become incapacitated to discharge the duties of their office,
unless sooner removed for the same causes and in the same manner provided by law for members
of the judiciary of equivalent rank."

SEC. 2. Section 2 of the same Act, as amended, is hereby further amended, to reach as follows:

"SEC. 2. Sitting En Banc or Division; Quorum; Proceedings. - The CTA may sit en banc or in
three (3) Divisions, each Division consisting of three (3) Justices.

"Five (5) Justices shall constitute a quorum for sessions en banc and two (2) Justices for sessions
of a Division. Provided, That when the required quorum cannot be constituted due to any
vacancy, disqualification, inhibition, disability, or any other lawful cause, the Presiding Justice
shall designate any Justice of other Divisions of the Court to sit temporarily therein.

"The affirmative votes of five (5) members of the Court en banc shall be necessary to reverse a
decision of a Division but a simple majority of the Justices present necessary to promulgate a
resolution or decision in all other cases or two (2) members of a Division, as the case may be,
shall be necessary for the rendition of a decision or resolution in the Division Level."

SEC. 3. Appropriations. - The amount of Twenty million pesos (20,000,000.00) necessary to carry out
the provisions of this Act shall be appropriated immediately to be generated from whatever source that are
available in the National Treasury, based on a special supplemental budget to be submitted to the
Department of Budget and Management (DBM) which shall not exceed the herein appropriation.

SEC. 4. Repealing Clause. - - All laws, executive orders, executive issuances or letters of instruction or
any part thereof inconsistent with or contrary to the provisions of this Act are hereby deemed repealed,
amended or modified accordingly.

SEC. 5. Separability Clause. - If, for any reason, any section or provision of this Act shall be declared
unconstitutional or invalid, the other parts thereof not affected thereby shall remain valid.

SEC. 6. Effectivity Clause. - This Act shall take effect after fifteen (15) days following its publication in
at least two (2) newspapers of general circulation.

Approved,

(Sgd.) PROSPERO C. NOGRALES (Sgd.) MANNY VILLAR

Speaker of the House of President of the Senate
Representatives

This Act which is a consolidation of House Bill No. 1890 and Senate Bill No. 2009 was finally passed by
the House of Representative and the Senate on April 22, 2008 and March 12, 2008, respectively.

(Sgd.) MARILYN B. BARUA-YAP (Sgd.) EMMA LIRIO-REYES

Secretary General Secretary of Senate
House of Represenatives

Approved: June 12, 2008

182
(Sgd.) GLORIA MACAPAGAL-ARROYO
President of the Philippines

183
A.M. No. 05-11-07-CTA November 22, 2005

REVISED RULES OF THE COURT OF TAX APPEALS

Sirs/Mesdames:

Quoted hereunder, for your information, is a resolution of this Court dated NOV 22 2005.

Acting on the letter of the Chairman of the Committee on Revision of the Rules of Court submitting for
this Courts consideration and approval the Proposed Revised Rules of the Court of Tax Appeals, the
Court Resolved to APPROVE the same.

The Rule shall take effect on the fifteenth day of December 2005 following its publication in a newspaper
of general circulation in the Philippines not later than 25 November 2005.

22 November 2005.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,

Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, and Garcia, JJ., concur.
Chico-Nazario, J., on leave.

REVISED RULES OF THE COURT OF TAX APPEALS

Pursuant to Section 8 of Republic Act No. 1125, as further amended by Republic Act No. 9282, the Court
of Tax Appeals (hereinafter referred to as the Court) hereby adopts and promulgates the following Rules
for the conduct of its business:

RULE 1
TITLE AND CONSTRUCTION

SECTION 1. Title of the Rules These Rules shall be known and cited as the Revised Rules of the Court
of Tax Appeals (RRCTA). (RCTA, Rule 1, sec. 1a)

SEC. 2. Liberal construction.- The Rules shall be liberally construed in order to promote their objective
of securing a just, speedy, and inexpensive determination of every action and proceeding before the
Court. (RCTA, Rule 1, sec. 2a)

SEC. 3. Applicability of the Rules of Court. The Rules of Court in the Philippines shall apply
suppletorily to these Rules. (n)

RULE 2
THE COURT, ITS ORGANIZATION AND FUNCTIONS

Section 1. Composition of the Court. The Court is composed of a presiding justice and five associate
justices appointed by the President of the Philippines. In appropriate cases, the Court shall sit en banc, or

184
in two Divisions of three justices each, including the presiding justice, who shall be the Chairman of its
First Division. (n)

SEC. 2. Exercise of powers and functions. The Court shall exercise its adjudicative powers, functions
and duties en banc or in Divisions.

The Court shall sit en banc in the exercise of its administrative, ceremonial and non-adjudicative
functions. (n)

SEC. 3. Court en banc; quorum and voting. The presiding justice or, in his absence, the most senior
justice in attendance shall preside over the sessions of the Court en banc. The attendance of four justices
of the Court shall constitute a quorum for its sessions en banc. The presence at the deliberation and the
affirmative vote of four justices of the Court en banc shall be necessary for the rendition of a decision or
resolution on any case or matter submitted for its consideration. Where the necessary majority vote cannot
be had, the petition shall be dismissed; in appealed cases, the judgment or order appealed from shall stand
affirmed; and on all incidental matters, the petition or motion shall be denied.

No decision of a Division of the Court may be reversed or modified except by the affirmative vote of four
justices of the Court en banc acting on the case.

Interlocutory orders or resolutions shall be acted upon by majority vote of the justices present constituting
a quorum.

(Rules of Court, Rule 56, sec. 7a)

SEC. 4. The Court in Divisions; quorum and voting. The chairman of the Division or, in his absence, its
senior member shall preside over the sessions of the Court in Divisions. The attendance of at least two
justices of the Court shall be necessary to constitute a quorum for its sessions in Divisions. The presence
at the deliberation and the affirmative vote of at least two justices shall be required for the pronouncement
of a judgment or final resolution of the Court in Divisions. (n)

SEC. 5. Hearings. The Court en banc or in Divisions shall conduct hearings on such days and at such
times and at such places as it may fix, with notice to the parties concerned. However, the Friday of each
week shall be devoted to hearing motions, unless, for special reasons, the Court en banc or in Divisions
shall, motu proprio or upon motion of a party, fix another day for the hearing of any motion. (RCTA,
Rule 3, sec. 2a)

SEC. 6. Disqualification of justices.-

(a) Mandatory. No justice or other officer or employee of the Court shall intervene, directly or
indirectly, in the management or control of any private enterprise which in any way may be
affected by the functions of the Court. Justices of the Court shall be disqualified from sitting in
any case on the same grounds provided under the first paragraph, Section 1, Rule 137 of the
Rules of Court. No person who has once served in the Court either as presiding justice or as
associate justice shall be qualified to practice as counsel before the Court for a period of one year
from his retirement or resignation as such. (Rules of Court, Rule 137, sec. 1, par. 1a)

(b) Disclosure and consent of parties and lawyers. A justice disqualified under the first
paragraph, Section 1 of Rule 137 of the Rules of Court, may, instead of withdrawing from a case
or proceeding, disclose on the records the basis of his disqualification. If, based on such

185
 disclosure, the parties and lawyers, independently of the justices participation, all agree in
writing that the reason for the inhibition is immaterial or unsubstantial, the justice may participate
in the action or proceeding. The agreement, signed by all parties and lawyers, shall be
incorporated in the record of the action or proceeding. (Rules of Court, Rule 137, sec. 1, par. 1a)

(c) Voluntary. A justice of the Court may, in the exercise of his sound discretion, disqualify
himself from sitting in a case or proceeding, for just or valid reasons other than those mentioned
above. (Rules of Court, Rule 137, sec. 1, par. 2a)

A justice of the Court who inhibits himself from sitting in a case or proceeding shall immediately notify
in writing the presiding justice and the members of his Division. (n)

SEC. 7. Motion to inhibit a justice. When a motion for inhibition of a justice is filed, the Court, en banc
or in Division, shall act upon the motion. However, if the motion for inhibition is based on a discretionary
ground, the Court shall refer the motion to the justice involved for his appropriate action. (n)

RULE 3
PLACE OF OFFICE, SEAL AND OFFICE HOURS

SECTION 1. Place of office. The Court shall have its principal office in Metro Manila. RCTA, Rule 3,
sec. 1a)

SEC. 2. Court seal. The seal of the Court shall be circular in form and shall be of the usual size. It shall
bear, in its center, a design of the coat of arms of the Republic of the Philippines with the words BATAS
AT BAYAN immediately underneath the design. On the upper margin running from left to right are the
words COURT OF TAX APPEALS, and on its lower margin the words REPUBLIKA NG
PILIPINAS. (RCTA, Rule 2, sec. 1a)

SEC. 3. Seal, where affixed. The seal of the Court shall be affixed to all summons, subpoena, notices,
decisions, orders or resolutions, certified copies of official records and such other papers that the Court
may require to be sealed. (n)

SEC. 4. Office hours. The Office of the Clerk of Court shall be open for the transaction of business and
receiving petitions, complaints, pleadings, motions, and other papers, during the hours from eight oclock
in the morning to four-thirty oclock in the afternoon on Mondays to Fridays, except on such days as may
be designated by law or executive proclamation as non-working official holidays. (RCTA, Rule 3, sec.
3a)

RULE 4
JURISDICTION OF THE COURT

SECTION 1. Jurisdiction of the Court. The Court shall exercise exclusive original jurisdiction over or
appellate jurisdiction to review by appeal the cases specified in Republic Act No. 1125, Section 7, as
amended by Republic Act No. 9282, Section 7. (n)

SEC. 2. Cases within the jurisdiction of the Court en banc. The Court en banc shall exercise exclusive
appellate jurisdiction to review by appeal the following:

186
 (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions
in the exercise of its exclusive appellate jurisdiction over:

(1) Cases arising from administrative agencies Bureau of Internal Revenue, Bureau of
Customs, Department of Finance, Department of Trade and Industry, Department of
Agriculture;

(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original
jurisdiction; and

(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their
original jurisdiction involving final and executory assessments for taxes, fees, charges
and penalties, where the principal amount of taxes and penalties claimed is less than one
million pesos;

(b) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or
resolved by them in the exercise of their appellate jurisdiction;

(c) Decisions, resolutions or orders of the Regional Trial Courts in tax collection cases decided or
resolved by them in the exercise of their appellate jurisdiction;

(d) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in
Division in the exercise of its exclusive original jurisdiction over tax collection cases;

(e) Decisions of the Central Board of Assessment Appeals (CBAA) in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally decided
by the provincial or city board of assessment appeals;

(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in
Division in the exercise of its exclusive original jurisdiction over cases involving criminal
offenses arising from violations of the National Internal Revenue Code or the Tariff and Customs
Code and other laws administered by the Bureau of Internal Revenue or Bureau of Customs;

(g) Decisions, resolutions or orders on motions for reconsideration or new trial of the Court in
Division in the exercise of its exclusive appellate jurisdiction over criminal offenses mentioned in
the preceding subparagraph; and

(h) Decisions, resolutions or orders of the Regional trial Courts in the exercise of their appellate
jurisdiction over criminal offenses mentioned in subparagraph (f).

(n)

SEC. 3. Cases within the jurisdiction of the Court in Divisions. The Court in Divisions shall exercise:

(a) Exclusive original or appellate jurisdiction to review by appeal the following:

(1) Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation

187
 thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue;

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue Code or other laws
administered by the Bureau of Internal Revenue, where the National Internal Revenue
Code or other applicable law provides a specific period for action: Provided, that in case
of disputed assessments, the inaction of the Commissioner of Internal Revenue within the
one hundred eighty day-period under Section 228 of the National Internal revenue Code
shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the
Court and does not necessarily constitute a formal decision of the Commissioner of
Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await
the final decision of the Commissioner of Internal Revenue on the disputed assessments
beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal
such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided,
still further, that in the case of claims for refund of taxes erroneously or illegally
collected, the taxpayer must file a petition for review with the Court prior to the
expiration of the two-year period under Section 229 of the National Internal Revenue
Code;

(3) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases
decided or resolved by them in the exercise of their original jurisdiction;

(4) Decisions of the Commissioner of Customs in cases involving liability for customs
duties, fees or other money charges, seizure, detention or release of property affected,
fines, forfeitures of other penalties in relation thereto, or other matters arising under the
Customs Law or other laws administered by the Bureau of Customs;

(5) Decisions of the Secretary of Finance on customs cases elevated to him automatically
for review from decisions of the Commissioner of Customs adverse to the Government
under Section 2315 of the Tariff and Customs Code; and

(6) Decisions of the Secretary of Trade and Industry, in the case of nonagricultural
product, commodity or article, and the Secretary of Agriculture, in the case of agricultural
product, commodity or article, involving dumping and countervailing duties under
Section 301 and 302, respectively, of the Tariff and Customs Code, and safeguard
measures under Republic Act No. 8800, where either party may appeal the decision to
impose or not to impose said duties;

(b) Exclusive jurisdiction over cases involving criminal offenses, to wit:

(1) Original jurisdiction over all criminal offenses arising from violations of the National
internal Revenue Code or Tariff and Customs Code and other laws administered by the
Bureau of Internal Revenue of the Bureau of Customs, where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is one million pesos or more;
and

(2) Appellate jurisdiction over appeals from the judgments, resolutions or orders of the
Regional Trial Courts in their original jurisdiction in criminal offenses arising from

188
 violations of the National Internal Revenue Code or Tariff and Customs Code and other
laws administered by the Bureau of Internal Revenue or Bureau of Customs, where the
principal amount of taxes and fees, exclusive of charges and penalties, claimed is less
than one million pesos or where there is no specified amount claimed;

(c) Exclusive jurisdiction over tax collections cases, to wit:

(1) Original jurisdiction in tax collection cases involving final and executory assessments
for taxes, fees, charges and penalties, where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is one million pesos or more; and

(2) Appellate jurisdiction over appeals from the judgments, resolutions or orders of the
Regional Trial Courts in tax collection cases originally decided by them within their
respective territorial jurisdiction. (n)

RULE 5
FORM AND STYLE OF PAPERS

SECTION 1. Style. All papers filed with the Court shall be either printed or typewritten, and fastened
on the upper left hand corner. All such papers shall have a caption, date and signature, and copies, as
specified below. (RCTA, Rule 4, sec. 1a)

SEC. 2. Size and specifications. Printed or typewritten papers shall be typed doubled-spaced on good
quality, unglazed and plain white paper eight and a half inches wide by thirteen inches long (legal-size),
or eight and a quarter inches wide by eleven and three-fourths inches long (A4-size), at least substance
twenty and printed on one side only without covers. There shall be a margin at the left-hand side of each
page of not less than one and one-half inches in width and at the top, bottom and right-hand side of each
page of not less than one inch in width. (RCTA, Rule 4, sec. 3a)

SEC. 3. Citations. Citations shall be indented at least one inch from the inside margin and typed single-
spaced. (RCTA, Rule 4, sec. 4a)

SEC. 4. Number of copies. The parties shall file eleven signed copies of every paper for cases before the
Court en banc and six signed copies for cases before a Division of the Court in addition to the signed
original copy, except as otherwise directed by the Court. Papers to be filed in more than one case shall
include one additional copy for each additional case. (RCTA, Rule 4, sec. 5a)

SEC. 5. Clear and legible copies. All copies shall be clear and legible. (RCTA, Rule 4, sec. 6a)

RULE 6
PLEADINGS FILED WITH THE COURT

SECTION 1. Complaint; contents. The complaint shall contain allegations showing jurisdiction of the
Court and a concise statement of the complete facts of the plaintiffs cause or causes of action. The
complaint shall be verified and must contain a certification against forum shopping as provided in
Sections 4 and 5, Rule 7 of the Rules of Court. (n)

SEC. 2. Petition for review; contents. The petition for review shall contain allegations showing the
jurisdiction of the Court, a concise statement of the complete facts and a summary statement of the issues

189
involved in the case, as well as the reasons relied upon for the review of the challenged decision. The
petition shall be verified and must contain a certification against forum shopping as provided in Section 3,
Rule 46 of the Rules of Court. A clearly legible duplicate original or certified true copy of the decision
appealed from shall be attached to the petition. (RTCA, Rule 5, sec. 2a)

SEC. 3. Payment of docket fees. The Clerk of Court shall not receive a petition for review for filing
unless the petitioner submits proof of payment of the docket fees. Upon receipt of the petition or the
complaint, it will be docketed and assigned a number, which shall be placed by the parties on all papers
thereafter filed in the proceeding. The Clerk of Court will then issue the necessary summons to the
respondent or defendant. (RCTA, Rule 5, sec. 3a)

SEC. 4. Bill of particulars.

(a) Requirement for bill of particulars. The Court, on its own initiative or upon motion of either
party filed before responding to a pleading or, if no responsive pleading is permitted by these
Rules, within ten days after service of the pleading upon him, may order a party to submit a
detailed statement of the nature of the claim or defense or of any matter stated in any pleading,
which is not averred with sufficient definiteness or particularity. Such order or motion shall point
out the defects complained of and the details desired. After service of the bill of particulars or of a
more definite pleading, the moving or adverse party may file his responsive pleading within ten
days. (RCTA, Rule 8, sec. 1a)

(b) Failure to comply. If the order issued by the Court pursuant to paragraph (a) above is not
complied with within ten days after notice of the order, or within such other time as the Court
may fix, the Court may strike out the pleading to which the motion was directed or may make
such other order as it deems just. The Court may upon motion set aside the order, or modify it in
the interest of justice. (RCTA, Rule 8, sec. 2a)

(c) Motion for bill of particulars when not allowed. No motion for bill of particulars shall be
allowed in cases falling under Sections 3(a)(3) and 3(c)(2) of Rule 4 of these Rules. (n)

SEC. 5. Answer.

(a) Time for filing and contents. Within fifteen days after service of summons, the respondent
or the defendant shall file an answer to the petition or complaint which shall include all defenses
in law and the specific provisions of law and applicable jurisprudence and grounds for dismissal
of the petition or complaint, or which shall prevent and bar recovery.

(Rule of Procedure for Civil Forfeiture, Asset Preservation and Freeze Order, Sec. 9, par. 2a; and
RCTA, Rule 7, sec. 1a)

(b) Transmittal of records. The respondent Commissioner of Internal Revenue, Commissioner

of Customs, the Secretary of Finance, the Secretary of Agriculture, or the Secretary of Trade and
Industry, within ten days after his answer, the chairman of the Central Board of Assessment
Appeals and the presiding judges of the Regional Trial Courts, within ten days from receipt of
notice, shall certify and forward to the Court all the records of the case in their possession, with
the pages duly numbered, and, if the records are in separate folders, then the folders will also be
numbered. If there are no records, such fact shall be manifested to the Court within the same
period of ten days. The Court may, on motion, and for good cause shown, grant an extension of
time within which to submit the aforesaid records of the case. Failure to transmit the records

190
 within the time prescribed herein or within the time allowed by the Court may constitute indirect
contempt of court. (RCTA, Rule 7, sec. 2a)

SEC. 6. Entry of appearance. An attorney may enter his appearance by signing the initial pleading. An
attorney may later enter his appearance only by filing an entry of appearance with the written conformity
of his client.

The initial pleading or entry of appearance shall show:

(1) The attorneys specific address which must not be a Post Office Box number;

(2) His Roll of Attorneys Number;

(3) The date and number of his current membership due in the Integrated Bar of the Philippines
(IBP) per Official Receipt, or Lifetime Member Number;

(4) Current Professional Tax Receipt (PTR) number together with date and place of issuance; and

(5) MCLE certificate number and date of issue, unless exempt.

The attorney or party entering his appearance shall serve a copy of the entry of appearance upon the
opposing party. An attorney who appears in open court without previously having filed his written
appearance must give his business address to the Clerk of Court and file his written appearance within
forty-eight hours from such open court appearance. An attorney or party who has filed his appearance and
who changes his address of record shall notify the Clerk of Court and the adverse party of such change of
address, and a separate notice of such change of address shall be filed for each additional case. (RCTA,
Rule 10, sec. 1a)

RULE 7
PROCEDURE IN THE COURT OF TAX APPEALS

SECTION 1. Applicability of the Rules of the Court of Appeals, exception. The procedure in the Court
en banc or in Divisions in original and in appealed cases shall be the same as those in petitions for review
and appeals before the Court of Appeals pursuant to the applicable provisions of Rules 42, 43, 44 and 46
of the Rules of Court, except as otherwise provided for in these Rules. (n)

RULE 8
PROCEDURE IN CIVIL CASES

SECTION 1. Review of cases in the Court en banc. In cases falling under the exclusive appellate
jurisdiction of the Court en banc, the petition for review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely motion for reconsideration or new trial with the
Division. (n)

SEC. 2. Review of cases in the Court in Division. In appealed cases falling under the jurisdiction of the
Court in Division in Sections 3(a)(1) to 3(a)(6) and 3(c)(2) of Rule 4, the party filing the case shall be
called the Petitioner and the party against whom the case is filed shall be called the Respondent. The
pleading shall be entitled Petition for Review.

191
In tax collection cases originally filed with the Court under Section 3(c)(1) of Rule 4, the party filing the
case shall be called the Plaintiff and the party against whom the case is filed shall be called the Defendant.
The pleading shall be entitled Complaint. In appealed tax collection cases, the original captions shall be
retained. The party filing the appeal shall be called the Appellant and the party against whom the appeal is
filed shall be called the Appellee. (RCTA, Rule 5, Sec. 1a)

SEC. 3. Who may appeal; period to file petition. (a) A party adversely affected by a decision, ruling or
the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of
internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of
Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in
the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty
days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the
Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the
Commissioner of Internal revenue on claims for refund of internal revenue taxes erroneously or illegally
collected, the taxpayer must file a petition for review within the two-year period prescribed by law from
payment or collection of the taxes. (n)

(b) A party adversely affected by a decision or resolution of a Division of the Court on a motion
for reconsideration or new trial may appeal to the Court by filing before it a petition for review
within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper
motion and the payment of the full amount of the docket and other lawful fees and deposit for
costs before the expiration of the reglementary period herein fixed, the Court may grant an
additional period not exceeding fifteen days from the expiration of the original period within
which to file the petition for review. (Rules of Court, Rule 42, sec. 1a)

(c) A party adversely affected by a decision or ruling of the Central Board of Assessment Appeals
and the Regional Trial Court in the exercise of their appellate jurisdiction may appeal to the Court
by filing before it a petition for review within thirty days from receipt of a copy of the questioned
decision or ruling. (n)

SEC. 4. Where to appeal; mode of appeal. (a) An appeal from a decision or ruling or the inaction of the
Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes
erroneously or illegally collected, the decision or ruling of the Commissioner of Customs, the Secretary of
Finance, the Secretary of Trade & Industry, the Secretary of Agriculture, and the Regional Trial Court in
the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for
review as provided in Rule 42 of the Rules of Court. The Court in Division shall act on the appeal. (n)

(b) An appeal from a decision or resolution of the Court in Division on a motion for
reconsideration or new trial shall be taken to the Court by petition for review as provided in Rule
43 of the Rules of Court. The Court en banc shall act on the appeal. (n)

(c) An appeal from a decision or ruling of the Central Board of Assessment Appeals or the
Regional Trial Court in the exercise of their appellate jurisdiction shall be taken to the Court by
filing before it a petition for review as provided in Rule 43 of the Rules of Court. The Court en
banc shall act on the appeal. (n)

RULE 9
PROCEDURE IN CRIMINAL CASES

192
SECTION 1. Review of cases in the Court. The review of criminal cases in the Court en banc or in
Division shall be governed by the applicable provisions of Rule 124 of the Rules of Court. (n)

SEC. 2. Institution of criminal actions. All criminal actions before the Court in Division in the exercise
of its original jurisdiction shall be instituted by the filing of an information in the name of the People of
the Philippines. In criminal actions involving violations of the National Internal Revenue Code and other
laws enforced by the Bureau of Internal Revenue, the Commissioner of Internal Revenue must approve
their filing. In criminal actions involving violations of the tariff and Customs Code and other laws
enforced by the Bureau of Customs, the Commissioner of Customs must approve their filing. (Rules of
Court, Rule 110, sec. 2a; n)

The institution of the criminal action shall interrupt the running of the period of prescription. (Rules of
Court, Rule 110, sec. 1, par. 2a)

SEC. 3. Prosecution of criminal actions. All criminal actions shall be conducted and prosecuted under
the direction and control of the public prosecutor. In criminal actions involving violation of the National
Internal Revenue Code or other laws enforced by the Bureau of Internal Revenue, and violations of the
Tariff and Customs Code or other laws enforced by the Bureau of Customs, the prosecution may be
conducted by their respective duly deputized legal officers. (Rules of Court, Rule 110, sec. 5, par. 6a)

SEC. 4. Warrant of arrest. Within ten days from the filing of the information, the Division of the Court
to which the case was raffled shall evaluate the resolution of the public prosecutor and its supporting
evidence. The Division may immediately dismiss the case if it finds that the evidence on record clearly
fails to establish probable cause. If the Division finds probable cause, it shall issue a warrant of arrest
signed by the Chairman of the Division. In case of doubt on the existence of probable cause, the Division
may order the prosecutor to present additional evidence, ex parte, within five days from notice. (Rules of
Court, Rule 112, sec. 6a)

SEC. 5. When search warrant may issue. The Division may issue a search warrant signed by its
Chairman following the requirements of Rule 126 of the Rules of Court. (n)

SEC. 6. Bail, how amount fixed; approval. The amount of bail to be posted in a case filed with the
Court shall be fixed and approved by the Division to which the case is raffled: Provided, however, that
where the accused is arrested, detained or otherwise placed in custody outside the Metropolitan Manila
area, any judge of the Regional Trial Court of the place where the arrest is made may accept and approve
the bail for his release and appearance before the Division to which his case is assigned. The judge who
accepted the bail and released the accused shall inform the Division that issued the order of arrest of his
action and forward to it the papers relative to the case. (Rules of Court, Rule 114, sec. 17a)

SEC. 7. Conditions of the bail. The conditions of the bail are that the accused shall appear and answer
the complaint or information in the Division of the Court to which it is raffled or transferred for trial and
submit himself to its orders and processes. If convicted, and the case is appealed to the Court en banc or
to the Supreme Court, he will surrender himself for the execution of such judgment as the Court en banc
or the Supreme Court may render; or that, in the event the case is to be tried anew or remained for a new
trial, he shall appear before the Division to which it may be remanded and submit himself to its orders and
processes. Rules of Court, Rule 114, sec. 2a)

SEC. 8. Release order. The Clerk of Court shall issue the corresponding release order. (Rules of Court,
Rule 114, sec. 3a)

193
SEC. 9. Appeal; period to appeal. (a) An appeal to the Court in criminal cases decided by a Regional
Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal pursuant to
Sections 3(a) and 6, Rule 122 of the Rules of Court within fifteen days from receipt of a copy of the
decision or final order with the court which rendered the final judgment or order appealed from and by
serving a copy upon the adverse party. The Court in Division shall act on the appeal.

(b) An appeal to the Court en banc in criminal cases decided by the Court in Division shall be
taken by filing a petition for review as provided in Rule 43 of the Rules of Court within fifteen
days from receipt of a copy of the decision or resolution appealed from. The Court may, for good
cause, extend the time for filing of the petition for review for an additional period not exceeding
fifteen days.

(c) An appeal to the Court in criminal cases decided by the Regional Trial Courts in the exercise
of their appellate jurisdiction shall be taken by filing a petition for review as provided in Rule 43
of the Rules of Court within fifteen days from receipt of a copy of the decision or final order
appealed from. The Court en banc shall act on the appeal. (n)

SEC. 10. Solicitor General as counsel for the People and government officials sued in their official
capacity. The Solicitor General shall represent the People of the Philippines and government officials
sued in their official capacity in all cases brought to the Court in the exercise of its appellate jurisdiction.
He may deputized the legal officers of the Bureau of Internal Revenue in cases brought under the
National Internal Revenue Code or other laws enforced by the Bureau of Internal Revenue, or the legal
officers of the Bureau of Customs in cases brought under the Tariff and Customs Code of the Philippines
or other laws enforced by the Bureau of Customs, to appear in behalf of the officials of said agencies sued
in their official capacity: Provided, however, such duly deputized legal officers shall remain at all times
under the direct control and supervision of the Solicitor General. (n)

SEC. 11. Inclusion of civil action in criminal action. In cases within the jurisdiction of the Court, the
criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties
shall be deemed jointly instituted in the same proceeding. The filing of the criminal action shall
necessarily carry with it the filing of the civil action. No right to reserve the filing of such civil action
separately from the criminal action shall be allowed or recognized. (Rules of Court, Rule 111, sec. 1[a],
par. 1a)

RULE 10
SUSPENSION OF COLLECTION OF TAX

SECTION 1. No suspension of collection of tax, except as herein prescribed. No appeal taken to the
Court shall suspend the payment, levy, distraint, or sale of any property of the taxpayer for the satisfaction
of his tax liability as provided under existing laws, except as hereinafter prescribed. (n)

SEC. 2. Who may file. Where the collection of the amount of the taxpayers liability, sought by means
of a demand for payment, by levy, distraint or sale of any property of the taxpayer, or by whatever means,
as provided under existing laws, may jeopardized the interest of the Government or the taxpayer, an
interested party may file a motion for the suspension of the collection of the tax liability. (RCTA, Rule
12, sec. 1a)

SEC. 3. When to file. The motion for the suspension of the collection of the tax may be filed together
with the petition for review or with the answer, or in a separate motion filed by the interested party at any
stage of the proceedings. (RCTA, Rule 12, sec. 2)

194
SEC. 4. Contents and attachments of the motion. The motion for the suspension of the collection of the
tax shall be verified and shall state clearly and distinctly the facts and the grounds relied upon in support
of the motion. Affidavits and other documentary evidence in support thereof shall be attached thereto,
which, if uncontroverted, would be admissible in evidence as proof of the facts alleged in the motion.
(RCTA, Rule 12, sec. 3a)

SEC. 5. Opposition. Unless a shorter period is fixed by the Court because of the urgency of the motion,
the adverse party shall, within five days after receipt of a copy of the motion, file an opposition thereto, if
any, which shall state clearly and distinctly the facts and the grounds relied upon in support of the
opposition. (RCTA, Rule 12, sec. 4)

SEC. 6. Hearing of the motion. The movant shall, upon receipt of the opposition, set the motion for
hearing at the next available motion day, and the Court shall give preference to the motion over all other
cases, except criminal cases. At the hearing, both parties shall submit their respective evidence. If
warranted, the Court may grant the motion if the movant shall deposit with the Court an amount in cash
equal to the value of the property or goods under dispute or filing with the Court of an acceptable surety
bond in an amount not more than double the disputed amount or value. However, for the sake of
expediency, the Court, motu proprio or upon motion of the parties, may consolidate the hearing of the
motion for the suspension of the collection of the tax with the hearing on the merits of the case. (RCTA,
Rule 12, sec. 5a)

SEC. 7. Corporate surety bonds. In the selection and qualification of surety companies, the parties and
the Court shall be guided by Supreme Court Circular A.M. No. 04-7-02-SC, dated July 20, 2004. (n)

RULE 11
PRE-TRIAL

SECTION 1. Applicability. The rule on pre-trial under Rules 18 and 118 of the Rules of Court, as
amplified in A.M. No. 03-1-09-SC dated July 13, 2004 (Re: Rule on Guidelines to be Observed by Trial
Court Judges and Clerk of Court in the Conduct of Pre-Trial and Use of Deposition-Discovery Measures),
shall apply to all cases falling within the original jurisdiction of the Court, except that the parties may not
be allowed to compromise the criminal liability or submit the case to mediation, arbitration or other mode
of alternative dispute resolution. (n)

SEC. 2. Mandatory pre-trial. In civil cases, the Clerk of Court shall set the case for pre-trial on the first
available date immediately following the tenth day after the filing of the answer.

In criminal cases, the Clerk of Court shall set the case for pre-trial not later than ten days after
arraignment, if the accused is detained, nor later than thirty days if the accused is on bail.

(RCTA, Rule 11, sec. 1a)

SEC. 3. Setting for an earlier date. Where, due to the urgency of the case, either party desires that the
pre-trial be set on an earlier date, such party shall so state in his pleading, in which event the clerk of
Court shall set the pre-trial on the first available date immediately after the filing of the answer. (RCTA,
Rule 11, sec. 2a)

SEC. 4. Duty of the Court. The Court shall confer with the parties in pre-trial conferences with a view
to narrowing the issues, making admissions of or stipulating on facts, simplifying the presentation of

195
evidence, or otherwise assisting in the preparation for trial or possible disposition of the case in whole or
in part without trial. (n)

SEC. 5. Procedure in civil cases. In civil cases, the parties shall submit, at least three days before the
pre-trial, their respective pre-trial briefs containing the following:

(a) A statement of their willingness to compromise the civil liability indicating its desired terms,
except that the case shall not be subject to referral to mediation, arbitration or other mode of
alternative dispute resolution;

(b) A summary of admitted facts and proposed stipulation of facts;

(c) The issues to be tried or resolved;

(d) The documents or exhibits to be presented, stating their purpose. No evidence shall be
allowed to be presented and offered during the trial in support of a partys evidence-in-chief other
than those that had been pre-marked and identified, unless allowed by the Court to prevent
manifest injustice;

(e) A manifestation of their having availed themselves of discovery procedures or referral to

commissioners; and

(f) The numbers and names of the witnesses, the substance of their testimonies and the
approximate number of hours that will be required by the parties for the presentation of their
respective witnesses.

The consequence on the party at fault shall be the same as the effect of failure to appear.

Failure to file the pre-trial brief or to comply with its required contents shall have the same effect as
failure to appear at the pre-trial.

(Rules of Court, Rule 18, sec. 6a)

SEC. 6. Procedure in criminal cases.

(a) Before the preliminary conference. Before the pre-trial conference, the Court may issue an
order referring the case to the Division Clerk of Court for a preliminary conference of the parties
at least three days prior to the pre-trial:

(1) To mark the documents or exhibits to be presented by the parties and copies to be
attached to the records after comparison;

(2) To consider other matters as may aid in its disposition; and

(3) To inform the parties that no evidence shall be allowed to be presented and offered
during the trial other than those identified and marked during the pre-trial unless allowed
by the Court to prevent manifest injustice.

196
(Rule on Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of
Pre-trial and Use of Deposition-Discovery Measures, Sec. 1B[2]a)

(b) During the preliminary conference. The Division Clerk of Court shall:

(1) Mark the documents to be presented as exhibits and copies attached to the records
after comparison;

(2) Ascertain from the parties the undisputed facts and admission on the genuineness and
due execution of documents marked as exhibits; and

(3) Consider such other matters as may aid in the prompt disposition of the case.

The proceedings during the preliminary conference shall be recorded in the minutes of
preliminary conference to be signed by both parties and counsel. The Division Clerk of Court
shall attach the minutes of preliminary conference and the exhibits to the case record before the
pre-trial.

(Rule on Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of
Pre-trial and Use of Deposition-Discovery Measures, Sec. IB[3]a)

(c) During the pre-trial conference. The Court at the pre-trial conference shall consider the
following:

(1) Stipulation of facts and issues raised;

(2) Marking for identification of evidence of the parties;

(3) Waiver of objections to admissibility of evidence;

(4) Modification of order of trial; and

(5) Such matters as will promote a fair and expeditious trial of the criminal and civil
aspects of the case.

(Rules of Court, Rule 118, sec. 1a).

All agreements or admissions made or entered during the pre-trial conference shall be in writing
and signed by the accused and counsel; otherwise, they cannot be used in evidence against the
accused. The agreements shall be subject to the approval of the Court.

(Rule on Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of
Pre-trial and Use of Deposition Discovery Measures, Sec. IB[8]a; and Rules of Court, Rule 118,
sec. 2a)

The Court may impose appropriate sanctions or penalties on the accused or counsel or the
prosecutor who does not appear at the pre-trial conference and does not offer an acceptable
excuse for his absence and lack of cooperation. (Rules of Court, Rule 118, sec. 3a)

197
 (d) Pre-trial order. After the pre-trial conference, the Court shall issue a pre-trial order reciting
the actions taken, the facts stipulated, the admissions made, evidence marked, and such other
matters covered during the pre-trial conference. The order shall bind the parties, limit the trial to
matters not disposed of and control the course of the action during the trial, unless modified by
the Court to prevent manifest injustice. (Rules of Court, Rule 118, sec. 4a)

RULE 12
TRIAL

SECTION 1. Procedure. The Court shall conduct the trial in accordance with Rule 30 of the Rules of
Court in civil cases and Rule 119 thereof in criminal cases. (n)

SEC. 2. Power of the Court to receive evidence. The Court may receive evidence in the following
cases:

(a) In all cases falling within the original jurisdiction of the Court in Division pursuant to Section
3, Rule 4 of these Rules; and

(b) In appeals in both civil and criminal cases where the Court grants a new trial pursuant to
Section 2, Rule 53 and Section 12, Rule 124 of the Rules of Court.

(n)

SEC. 3. Taking of evidence by a justice. The Court may, motu proprio or upon proper motion, direct
that a case, or any issue therein, be assigned to one of its members for the taking of evidence, when the
determination of a question of fact arises at any stage of the proceedings, or when the taking of an account
is necessary, or when the determination of an issue of fact requires the examination of a long account. The
hearing before such justice shall proceed in all respects as though the same had been made before the
Court.

Upon the completion of such hearing, the justice concerned shall promptly submit to the Court a written
report thereon, stating therein his findings and conclusions. Thereafter, the Court shall render its decision
on the case, adopting, modifying, or rejecting the report in whole or in part, or, the Court may, in its
discretion, recommit it to the justice with instructions, or receive further evidence.

(n)

SEC. 4. Taking of evidence by Court official. In default or ex parte hearings, or in any case where the
parties agree in writing, the Court may delegate the reception of evidence to the Clerk of Court, the
Division Clerks of Court, their assistants who are members of the Philippine bar, or any Court attorney.
The reception of documentary evidence by a Court official shall be for the sole purpose of marking,
comparison with the original, and identification by witnesses of such documentary evidence. The Court
official shall have no power to rule on objections to any question or to the admission of exhibits, which
objections shall be resolved by the Court upon submission of his report and the transcripts within ten days
from termination of the hearing. (Rules of Court, Rule 30, sec. 9a)

SEC. 5. Presentation of voluminous documents or long accounts. In the interest of speedy

administration of justice, the following rules shall govern the presentation of voluminous documents or
long accounts, such as receipts, invoices and vouchers, as evidence to establish certain facts:

198
 (a) Summary and CPA certification. The party who desires to introduce in evidence such
voluminous documents or long accounts must, upon motion and approval by the Court, refer the
voluminous documents to an independent Certified Public Accountant (CPA) for the purpose of
presenting:

(1) a summary containing, among other matters, a chronological listing of the numbers,
dates and amounts covered by the invoices or receipts and the amount(s) of taxes paid
and

(2) a certification of an independent CPA attesting to the correctness of the contents of

the summary after making an examination, evaluation and audit of voluminous receipts,
invoices or long accounts.

The name of the Certified Public Accountant or partner of a professional partnership of certified
public accountants in charge must be stated in the motion. The Court shall issue a commission
authorizing him to conduct an audit and, thereafter, testify relative to such summary and
certification.

(b) Pre-marking and availability of originals. The receipts, invoices, vouchers or other
documents covering the said accounts or payment to be introduced in evidence must be pre-
marked by the party concerned and submitted to the Court in order to be made accessible to the
adverse party who desires to check and verify the correctness of the summary and CPA
certification. The original copies of the voluminous receipts, invoices or accounts must be ready
for verification and comparison in case doubt on its authenticity is raised during the hearing or
resolution of the formal offer of evidence. (n)

RULE 13
TRIAL BY COMMISSIONER

SECTION 1. Appointment of independent Certified Public Accountant (CPA). A party desiring to

present voluminous documents in evidence before the Court may secure the services of an independent
certified Public Accountant (CPA) at its own expense. The Court shall commission the latter as an officer
of the Court solely for the purpose of performing such audit functions as the Court may direct. (n)

SEC. 2. Duties of independent CPA. The independent CPA shall perform audit functions in accordance
with the generally accepted accounting principles, rules and regulations, which shall include:

(a) Examination and verification of receipts, invoices, vouchers and other long accounts;

(b) Reproduction of, and comparison of such reproduction with, and certification that the same
are faithful copies of original documents, and pre-marking of documentary exhibits consisting of
voluminous documents;

(c) Preparation of schedules or summaries containing a chronological listing of the numbers,

dates and amounts covered by receipts or invoices or other relevant documents and the amount(s)
of taxes paid;

(d) Making findings as to compliance with substantiation requirements under pertinent tax laws,
regulations and jurisprudence;

199
 (e) Submission of a formal report with certification of authenticity and veracity of findings and
conclusions in the performance of the audit;

(f) Testifying on such formal report; and

(g) Performing such other functions as the Court may direct.

SEC. 3. Findings of independent CPA. The submission by the independent CPA of pre-marked
documentary exhibits shall be subject to verification and comparison with the original documents, the
availability of which shall be the primary responsibility of the party possessing such documents and,
secondarily, by the independent CPA. The findings and conclusions of the independent CPA may be
challenged by the parties and shall not be conclusive upon the Court, which may, in whole or in part,
adopt such findings and conclusions subject to verification. (n)

SEC. 4. Other referral to commissioner. Whenever practicable and convenient, the Court may apply the
procedure prescribed in Rule 32 of the Rules of Court. When the parties stipulate that a commissioners
findings of fact shall be final, only questions of law shall thereafter be considered. (n)

SEC. 5. Compensation of Commissioner. The Court shall allow the commissioners such reasonable
compensation as the circumstances of the case may warrant. (Rules of Court, Rule 32, sec. 13a)

RULE 14
JUDGMENT, ITS ENTRY AND EXECUTION

SECTION 1. Rendition of judgment. The Court shall decide the cases brought before it in accordance
with Section 15, paragraph (1), Article VIII of the 1987 Constitution. The conclusions of the Court shall
be reached in consultation by the Members on the merits of the case before its assignment to a Member
for the writing of the decision. The presiding justice or chairman of the Division shall include the case in
an agenda for a meeting of the Court en banc or in Division, as the case may be, for its deliberation. If a
majority of the justices of the Court en banc or in Division agree on the draft decision, the ponente shall
finalize the decision for the signature of the concurring justices and its immediate promulgation. Any
justice of the Court en banc or in Division may submit a separate written concurring or dissenting opinion
within twenty days from the date of the voting on the case. The concurring and dissenting opinions,
together with the majority opinion, shall be jointly promulgated and attached to the rollo.

In deciding the case, the Court may not limit itself to the issues stipulated by the parties but may also rule
upon related issues necessary to achieve an orderly disposition of the case. (2002 Internal Rules of the
Court of Appeals, Rule VI, secs. 9 and 10a; and Rules of Court, Rule 51, sec. 2a)

SEC. 2. Form of decision. Every decision or final resolution of the Court shall be in writing, stating
clearly and distinctly the findings of fact and the conclusions of law on which it is based, and signed by
the justices concurring therein. Such findings and conclusions shall be contained in the decision or final
resolution itself. However, in appealed cases, the Court may adopt by reference the findings and
conclusions set forth in the decision, order or resolution appealed from.

Every decision of the Court shall be accompanied by a certification signed by the presiding justice or
acting presiding justice, chairman or most senior member as acting chairman of the Court en banc or in
Division in the following form:

200
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the
above decision were reached in consultation before the case was assigned to the writer of the opinion of
the Court.

(Rules of Court, Rule 51, sec 5a; and 2002 Internal Rules of the Court of Appeals, Rule VI, sec. 11a)

SEC. 3. Amended decision. Any action modifying or reversing a decision of the Court en banc or in
Division shall be denominated as Amended Decision. (2002 Internal Rules of the Court of Appeals, Rule
VI, sec. 12a)

SEC. 4. Resolution. Any disposition of the Court en banc or in Divisions other than on the merits shall
be embodied in a Resolution.

(2002 Internal Rules of the Court of Appeals, Rule VI, sec. 12a)

SEC. 5. Promulgation and notice of decision and resolution. The Clerk of Court or Deputy Clerk of
Court shall have the direct responsibility for the promulgation of the decision and resolution of the Court.
He shall see to it that the decision and resolution are properly signed by the concurring and dissenting
justices and the required certification is duly accomplished.

Promulgation consists of the filing of the decision or resolution with the Clerk of Court or Division Clerk
of Court, who shall forthwith annotate the date and time of receipt and attest to it by his signature thereon.
He shall serve notice of such decision or resolution upon the parties or their counsel, furnishing them with
certified true copies thereof.

(2002 Internal Rules of the Court of Appeals, Rule VI, sec. 13a; and Rules of Court, Rule 51, sec. 9a)

In criminal cases originally filed with and decided by the Court in Division, the chairman shall cause the
decision or resolution to be filed with the Division Clerk of Court in a sealed envelope, who shall
schedule its promulgation, giving notice to the prosecution, the accused personally or through his
bondsman or warden, and counsel requiring their presence at the promulgation.

The promulgation shall consist of the reading by the Division Clerk of Court of the dispositive portion of
the decision or resolution in the presence of the accused and a justice of the Division that rendered the
same. If the accused is detained, the warden shall produce him before the Court. However, if he is
detained outside Metro Manila, the Court may authorize the executive judge of the Regional Trial Court
having territorial jurisdiction over the place of detention to promulgate the decision or resolution at such
place

(Rules of Court, Rule 120, sec. 6a)

SEC. 6. Entry of judgment and final resolution. If no appeal or motion for reconsideration or new trial
is filed within the time provided in these Rules, the Clerk of Court shall forthwith enter the judgment or
final resolution in the book of judgment. The date when the judgment or final resolution becomes
executory shall be deemed the date of its entry. The entry shall contain the dispositive part of the
judgment or final resolution and shall be signed by the Clerk of Court, with a certification that such
judgment or resolution has become final and executory. (Rules of Court, Rule 51, sec. 10a)

201
SEC. 7. Execution of judgment. Upon the expiration of the period to appeal from a judgment or order
that disposes of the action or proceeding and no appeal has been duly perfected, execution shall issue as a
matter of right, on motion.

If an appeal has been duly perfected and finally resolved, execution may be forthwith applied for in the
court of origin, on motion of the judgment oblige, submitting therewith a certified true copy of the
judgment or final order sought to be enforced and of its entry, with notice to the adverse party.

(Rules of Court, Rule 39, sec. 1a)

RULE 15
MOTION FOR RECONSIDERATION OR NEW TRIAL

SECTION 1. Who may and when to file motion. Any aggrieved party may seek a reconsideration or
new trial of any decision, resolution or order of the Court. He shall file a motion for reconsideration or
new trial within fifteen days from the date he received notice of the decision, resolution or order of the
Court in question. (RCTA, Rule 13, sec. 1a)

SEC. 2. Opposition. The adverse party may file an opposition to the motion for reconsideration or new
trial within ten days after his receipt of a copy of the motion for reconsideration or new trial of a decision,
resolution or order of the Court. (RCTA, Rule 13, sec. 2a)

SEC. 3. Hearing of the Motion. The motion for reconsideration or new trial, as well as the opposition
thereto, shall embody all supporting arguments and the movant shall set the same for hearing on the next
available motion day. Upon the expiration of the period set forth in the next preceding section, without
any opposition having been filed by the other party, the motion for reconsideration or new trial shall be
considered submitted for resolution, unless the Court deems it necessary to hear the parties on oral
argument, in which the case the Court shall issue the proper order. (RCTA, Rule 13, sec. 3a)

SEC. 4. Effect of filing the motion. The filing of a motion for reconsideration or new trial shall suspend
the running of the period within which an appeal may be perfected. (RCTA, Rule 13, sec. 4a)

SEC. 5. Grounds of motion for new trial. A motion for new trial may be based on one or more of the
following causes materially affecting the substantial rights of the movant:

(a) Fraud, accident, mistake or excusable negligence which ordinary prudence could not have
guarded against and by reason of which such aggrieved party has probably been impaired in his
rights; or

(b) Newly discovered evidence, which he could not, with reasonable diligence, have discovered
and produced at the trial and, which, if presented, would probably alter the result.

A motion for new trial shall include all grounds then available and those not included shall be deemed
waived.

(Rules of Court, Rule 37, sec. 1a)

SEC. 6. Contents of motion for reconsideration or new trial and notice. The motion shall be in writing
stating its grounds, a written notice of which shall be served by the movant on the adverse party.

202
A motion for new trial shall be proved in the manner provided for proof of motions. A motion for the
cause mentioned in subparagraph (a) of the preceding section shall be supported by affidavits of merits
which may be rebutted by counter-affidavits. A motion for the cause mentioned in subparagraph (b) of the
preceding section shall be supported by affidavits of the witnesses by whom such evidence is expected to
be given, or by duly authenticated documents which are proposed to be introduced in evidence.

A motion for reconsideration or new trial that does not comply with the foregoing provisions shall be
deemed pro forma, which shall not toll the reglementary period for appeal.

(Rules of Court, Rule 37, sec. 2a)

SEC. 7. No second motion for reconsideration or for new trial. No party shall be allowed to file a
second motion for reconsideration of a decision, final resolution or order; or for new trial. (Rules of
Court, Rule 52, sec. 2a)

SEC. 8. Ruling. The Court shall resolve the motion for reconsideration or new trial within three months
from the time it is deemed submitted for resolution. (Rules of Court, Rule 52, sec. 3a)

RULE 16
APPEAL

SECTION 1. Appeal to Supreme Court by petition for review on certiorari. A party adversely affected
by a decision or ruling of the Court en banc may appeal therefrom by filing with the Supreme Court a
verified petition for review on certiorari within fifteen days from receipt of a copy of the decision or
resolution, as provided in Rule 45 of the Rules of Court. If such party has filed a motion for
reconsideration or for new trial, the period herein fixed shall run from the partys receipt of a copy of the
resolution denying the motion for reconsideration or for new trial. (n)

SEC. 2. Effect of appeal. The motion for reconsideration or for new trial filed before the Court shall be
deemed abandoned if, during its pendency, the movant shall appeal to the supreme Court pursuant to
Section 1 of this Rule. (2002 Internal Rules of the Court of Appeals, Rule VI, sec. 15a)

RULE 17
LEGAL FEES AND COSTS

SECTION 1. Additional fees and costs. In addition to the fees prescribed in Rule 141 of the Rules of
Court and all amendments thereto, the following legal fees and costs shall be collected:

(a) For reception of evidence by a Court official pursuant to Section 4, Rule 12 of these Rules
five hundred pesos for each day of actual sessions; and

(b) For any other services of the Clerk of Court and other Court officials not provided for in Rule
141 of the Rules of Court, two hundred pesos.

RULE 18
EFFECTIVITY

203
SECTION 1. Effectivity of the Revised Rules. These Rules shall take effect on the fifteenth day of
December 2005 following their publication in a newspaper of general circulation in the Philippines not
later than 25 November 2005. (n)

204
Republic Act No. 7042 June 13, 1991

AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR

REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES, AND FOR OTHER
PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

d) The praise "doing business" shall include soliciting orders, service contracts, opening offices, whether
called "liaison" offices or branches; appointing representatives or distributors domiciled in the Philippines
or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180)
days or more; participating in the management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise
of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of
the purpose and object of the business organization: Provided, however, That the phrase "doing business:
shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic
corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a
nominee director or officer to represent its interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its own name and for its own account;

205
REPUBLIC ACT No. 7653

THE NEW CENTRAL BANK ACT

CHAPTER I ESTABLISHMENT AND ORGANIZATION OF THE BANGKO SENTRAL NG

PILIPINAS

ARTICLE I
CREATION, RESPONSIBILITIES AND CORPORATE POWERS OF THE BANGKO
SENTRAL

Section 1. Declaration of Policy. - The State shall maintain a central monetary authority that shall
function and operate as an independent and accountable body corporate in the discharge of its mandated
responsibilities concerning money, banking and credit. In line with this policy, and considering its unique
functions and responsibilities, the central monetary authority established under this Act, while being a
government-owned corporation, shall enjoy fiscal and administrative autonomy.

Section 2. Creation of the Bangko Sentral. - There is hereby established an independent central
monetary authority, which shall be a body corporate known as the Bangko Sentral ng Pilipinas, hereafter
referred to as the Bangko Sentral.

The capital of the Bangko Sentral shall be Fifty billion pesos (P50,000,000,000), to be fully
subscribed by the Government of the Republic, hereafter referred to as the Government, Ten billion pesos
(P10,000,000,000) of which shall be fully paid for by the Government upon the effectivity of this Act and
the balance to be paid for within a period of two (2) years from the effectivity of this Act in such manner
and form as the Government, through the Secretary of Finance and the Secretary of Budget and
Management, may thereafter determine.

Section 3. Responsibility and Primary Objective. - The Bangko Sentral shall provide policy
directions in the areas of money, banking, and credit. It shall have supervision over the operations of
banks and exercise such regulatory powers as provided in this Act and other pertinent laws over the
operations of finance companies and non-bank financial institutions performing quasi-banking functions,
hereafter referred to as quasi-banks, and institutions performing similar functions.

The primary objective of the Bangko Sentral is to maintain price stability conducive to a balanced
and sustainable growth of the economy. It shall also promote and maintain monetary stability and the
convertibility of the peso.

Section 4. Place of Business. - The Bangko Sentral shall have its principal place of business in
Metro Manila, but may maintain branches, agencies and correspondents in such other places as the proper
conduct of its business may require.

Section 5. Corporate Powers. - The Bangko Sentral is hereby authorized to adopt, alter, and use a
corporate seal which shall be judicially noticed; to enter into contracts; to lease or own real and personal
property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and
perform any and all things that may be necessary or proper to carry out the purposes of this Act.

The Bangko Sentral may acquire and hold such assets and incur such liabilities in connection with
its operations authorized by the provisions of this Act, or as are essential to the proper conduct of such
operations.

206
 The Bangko Sentral may compromise, condone or release, in whole or in part, any claim of or
settled liability to the Bangko Sentral, regardless of the amount involved, under such terms and conditions
as may be prescribed by the Monetary Board to protect the interests of the Bangko Sentral.

ARTICLE II
THE MONETARY BOARD

Section 6. Composition of the Monetary Board. - The powers and functions of the Bangko Sentral
shall be exercised by the Bangko Sentral Monetary Board, hereafter referred to as the Monetary Board,
composed of seven (7) members appointed by the President of the Philippines for a term of six (6) years.

The seven (7) members are:

(a) the Governor of the Bangko Sentral, who shall be the Chairman of the Monetary Board. The
Governor of the Bangko Sentral shall be head of a department and his appointment shall be
subject to confirmation by the Commission on Appointments. Whenever the Governor is unable
to attend a meeting of the Board, he shall designate a Deputy Governor to act as his alternate:
Provided, That in such event, the Monetary Board shall designate one of its members as acting
Chairman;

(b) a member of the Cabinet to be designated by the President of the Philippines. Whenever the
designated Cabinet Member is unable to attend a meeting of the Board, he shall designate an
Undersecretary in his Department to attend as his alternate; and

(c) five (5) members who shall come from the private sector, all of whom shall serve full-time:
Provided, however, That of the members first appointed under the provisions of this subsection,
three (3) shall have a term of six (6) years, and the other two (2), three (3) years.

No member of the Monetary Board may be reappointed more than once.

Section 7. Vacancies. - Any vacancy in the Monetary Board created by the death, resignation, or
removal of any member shall be filled by the appointment of a new member to complete the unexpired
period of the term of the member concerned.

Section 8. Qualifications. - The members of the Monetary Board must be natural-born citizens of
the Philippines, at least thirty-five (35) years of age, with the exception of the Governor who should at
least be forty (40) years of age, of good moral character, of unquestionable integrity, of known probity
and patriotism, and with recognized competence in social and economic disciplines.

Section 9. Disqualifications. - In addition to the disqualifications imposed by Republic Act No.

6713, a member of the Monetary Board is disqualified from being a director, officer, employee,
consultant, lawyer, agent or stockholder of any bank, quasi-bank or any other institution which is subject
to supervision or examination by the Bangko Sentral, in which case such member shall resign from, and
divest himself of any and all interests in such institution before assumption of office as member of the
Monetary Board.

The members of the Monetary Board coming from the private sector shall not hold any other
public office or public employment during their tenure.

207
 No person shall be a member of the Monetary Board if he has been connected directly with any
multilateral banking or financial institution or has a substantial interest in any private bank in the
Philippines, within one (1) year prior to his appointment; likewise, no member of the Monetary Board
shall be employed in any such institution within two (2) years after the expiration of his term except when
he serves as an official representative of the Philippine Government to such institution.

Section 10. Removal. - The President may remove any member of the Monetary Board for any of
the following reasons:

(a) If the member is subsequently disqualified under the provisions of Section 8 of this Act; or

(b) If he is physically or mentally incapacitated that he cannot properly discharge his duties and
responsibilities and such incapacity has lasted for more than six (6) months; or

(c) If the member is guilty of acts or operations which are of fraudulent or illegal character or
which are manifestly opposed to the aims and interests of the Bangko Sentral; or

(d) If the member no longer possesses the qualifications specified in Section 8 of this Act.

Section 11. Meetings. - The Monetary Board shall meet at least once a week. The Board may be
called to a meeting by the Governor of the Bangko Sentral or by two (2) other members of the Board.

The presence of four (4) members shall constitute a quorum: Provided, That in all cases the
Governor or his duly designated alternate shall be among the four (4).

Unless otherwise provided in this Act, all decisions of the Monetary Board shall require the
concurrence of at least four (4) members.

The Bangko Sentral shall maintain and preserve a complete record of the proceedings and
deliberations of the Monetary Board, including the tapes and transcripts of the stenographic notes, either
in their original form or in microfilm.

Section 12. Attendance of the Deputy Governors. - The Deputy Governors may attend the
meetings of the Monetary Board with the right to be heard.

Section 13. Salary. - The salary of the Governor and the members of the Monetary Board from the
private sector shall be fixed by the President of the Philippines at a sum commensurate to the importance
and responsibility attached to the position.

Section 14. Withdrawal of Persons Having a Personal Interest. - In addition to the requirements
of Republic Act No. 6713, any member of the Monetary Board with personal or pecuniary interest in any
matter in the agenda of the Monetary Board shall disclose his interest to the Board and shall retire from
the meeting when the matter is taken up. The decision taken on the matter shall be made public. The
minutes shall reflect the disclosure made and the retirement of the member concerned from the meeting.

Section 15. Exercise of Authority. - In the exercise of its authority, the Monetary Board shall:

(a) issue rules and regulations it considers necessary for the effective discharge of the
responsibilities and exercise of the powers vested upon the Monetary Board and the Bangko

208
 Sentral. The rules and regulations issued shall be reported to the President and the Congress
within fifteen (15) days from the date of their issuance;

(b) direct the management, operations, and administration of the Bangko Sentral, reorganize its
personnel, and issue such rules and regulations as it may deem necessary or convenient for this
purpose. The legal units of the Bangko Sentral shall be under the exclusive supervision and
control of the Monetary Board;

(c) establish a human resource management system which shall govern the selection, hiring,
appointment, transfer, promotion, or dismissal of all personnel. Such system shall aim to establish
professionalism and excellence at all levels of the Bangko Sentral in accordance with sound
principles of management.

A compensation structure, based on job evaluation studies and wage surveys and subject to the
Board's approval, shall be instituted as an integral component of the Bangko Sentral's human resource
development program: Provided, That the Monetary Board shall make its own system conform as closely
as possible with the principles provided for under Republic Act No. 6758: Provided, however, That
compensation and wage structure of employees whose positions fall under salary grade 19 and below
shall be in accordance with the rates prescribed under Republic Act No. 6758.

On the recommendation of the Governor, appoint, fix the remunerations and other emoluments,
and remove personnel of the Bangko Sentral, subject to pertinent civil service laws: Provided, That the
Monetary Board shall have exclusive and final authority to promote, transfer, assign, or reassign
personnel of the Bangko Sentral and these personnel actions are deemed made in the interest of the
service and not disciplinary: Provided, further, That the Monetary Board may delegate such authority to
the Governor under such guidelines as it may determine.

(d) adopt an annual budget for and authorize such expenditures by the Bangko Sentral as are in
the interest of the effective administration and operations of the Bangko Sentral in accordance
with applicable laws and regulations; and

(e) indemnify its members and other officials of the Bangko Sentral, including personnel of the
departments performing supervision and examination functions against all costs and expenses
reasonably incurred by such persons in connection with any civil or criminal action, suit or
proceedings to which he may be, or is, made a party by reason of the performance of his functions
or duties, unless he is finally adjudged in such action or proceeding to be liable for negligence or
misconduct.

In the event of a settlement or compromise, indemnification shall be provided only in connection

with such matters covered by the settlement as to which the Bangko Sentral is advised by external counsel
that the person to be indemnified did not commit any negligence or misconduct.

The costs and expenses incurred in defending the aforementioned action, suit or proceeding may
be paid by the Bangko Sentral in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the member, officer, or employee to repay the amount
advanced should it ultimately be determined by the Monetary Board that he is not entitled to be
indemnified as provided in this subsection.

Section 16. Responsibility. - Members of the Monetary Board, officials, examiners, and
employees of the Bangko Sentral who willfully violate this Act or who are guilty of negligence, abuses or

209
acts of malfeasance or misfeasance or fail to exercise extraordinary diligence in the performance of his
duties shall be held liable for any loss or injury suffered by the Bangko Sentral or other banking
institutions as a result of such violation, negligence, abuse, malfeasance, misfeasance or failure to
exercise extraordinary diligence.

Similar responsibility shall apply to members, officers, and employees of the Bangko Sentral for:
(1) the disclosure of any information of a confidential nature, or any information on the discussions or
resolutions of the Monetary Board, or about the confidential operations of the Bangko Sentral, unless the
disclosure is in connection with the performance of official functions with the Bangko Sentral, or is with
prior authorization of the Monetary Board or the Governor; or (2) the use of such information for personal
gain or to the detriment of the Government, the Bangko Sentral or third parties: Provided, however, That
any data or information required to be submitted to the President and/or the Congress, or to be published
under the provisions of this Act shall not be considered confidential.

ARTICLE III
THE GOVERNOR AND DEPUTY GOVERNORS OF THE BANGKO SENTRAL

Section 17. Powers and Duties of the Governor. - The Governor shall be the chief executive
officer of the Bangko Sentral. His powers and duties shall be to:

(a) prepare the agenda for the meetings of the Monetary Board and to submit for the consideration
of the Board the policies and measures which he believes to be necessary to carry out the
purposes and provisions of this Act;

(b) execute and administer the policies and measures approved by the Monetary Board;

(c) direct and supervise the operations and internal administration of the Bangko Sentral. The
Governor may delegate certain of his administrative responsibilities to other officers or may
assign specific tasks or responsibilities to any full-time member of the Monetary Board without
additional remuneration or allowance whenever he may deem fit or subject to such rules and
regulations as the Monetary Board may prescribe;

(d) appoint and fix the remunerations and other emoluments of personnel below the rank of a
department head in accordance with the position and compensation plans approved by the
Monetary Board, as well as to impose disciplinary measures upon personnel of the Bangko
Sentral, subject to the provisions of Section 15(c) of this Act: Provided, That removal of
personnel shall be with the approval of the Monetary Board;

(e) render opinions, decisions, or rulings, which shall be final and executory until reversed or
modified by the Monetary Board, on matters regarding application or enforcement of laws
pertaining to institutions supervised by the Bangko Sentral and laws pertaining to quasi-banks, as
well as regulations, policies or instructions issued by the Monetary Board, and the
implementation thereof; and

(f) exercise such other powers as may be vested in him by the Monetary Board.

Section 18. Representation of the Monetary Board and the Bangko Sentral. - The Governor of the
Bangko Sentral shall be the principal representative of the Monetary Board and of the Bangko Sentral
and, in such capacity and in accordance with the instructions of the Monetary Board, he shall be
empowered to:

210
 (a) represent the Monetary Board and the Bangko Sentral in all dealings with other offices,
agencies and instrumentalities of the Government and all other persons or entities, public or
private, whether domestic, foreign or international;

(b) sign contracts entered into by the Bangko Sentral, notes and securities issued by the Bangko
Sentral, all reports, balance sheets, profit and loss statements, correspondence and other
documents of the Bangko Sentral.

The signature of the Governor may be in facsimile whenever appropriate;

(c) represent the Bangko Sentral, either personally or through counsel, including private counsel,
as may be authorized by the Monetary Board, in any legal proceedings, action or specialized legal
studies; and

(d) delegate his power to represent the Bangko Sentral, as provided in subsections (a), (b) and (c)
of this section, to other officers upon his own responsibility: Provided, however, That in order to
preserve the integrity and the prestige of his office, the Governor of the Bangko Sentral may
choose not to participate in preliminary discussions with any multilateral banking or financial
institution on any negotiations for the Government within or outside the Philippines. During the
negotiations, he may instead be represented by a permanent negotiator.

Section 19. Authority of the Governor in Emergencies. - In case of emergencies where time is
sufficient to call a meeting of the Monetary Board, the Governor of the Bangko Sentral, with the
concurrence of two (2) other members of the Monetary Board, may decide any matter or take any action
within the authority of the Board.

The Governor shall submit a report to the President and Congress within seventy-two (72) hours
after the action has been taken.

At the soonest possible time, the Governor shall call a meeting of the Monetary Board to submit
his action for ratification.

Section 20. Outside Interests of the Governor and the Full-time Members of the Board. - The
Governor of the Bangko Sentral and the full-time members of the Board shall limit their professional
activities to those pertaining directly to their positions with the Bangko Sentral. Accordingly, they may
not accept any other employment, whether public or private, remunerated or ad honorem, with the
exception of positions in eleemosynary, civic, cultural or religious organizations or whenever, by
designation of the President, the Governor or the full-time member is tasked to represent the interest of
the Government or other government agencies in matters connected with or affecting the economy or the
financial system of the country.

Section 21. Deputy Governors. - The Governor of the Bangko Sentral, with the approval of the
Monetary Board, shall appoint not more than three (3) Deputy Governors who shall perform duties as
may be assigned to them by the Governor and the Board.

In the absence of the Governor, a Deputy Governor designated by the Governor shall act as chief
executive of the Bangko Sentral and shall exercise the powers and perform the duties of the Governor.
Whenever the Government is unable to attend meetings of government boards or councils in which he is
an ex officio member pursuant to provisions of special laws, a Deputy Governor as may be designated by
the Governor shall be vested with authority to participate and exercise the right to vote in such meetings.

211
 ARTICLE IV
OPERATIONS OF THE BANGKO SENTRAL

Section 22. Research and Statistics. - The Bangko Sentral shall prepare data and conduct
economic research for the guidance of the Monetary Board in the formulation and implementation of its
policies. Such data shall include, among others, forecasts of the balance of payments of the Philippines,
statistics on the monthly movement of the monetary aggregates and of prices and other statistical series
and economic studies useful for the formulation and analysis of monetary, banking, credit and exchange
policies.

Section 23. Authority to Obtain Data and Information. - The Bangko Sentral shall have the
authority to request from government offices and instrumentalities, or government-owned or controlled
corporations, any data which it may require for the proper discharge of its functions and responsibilities.
The Bangko Sentral through the Governor or in his absence, a duly authorized representative shall have
the power to issue a subpoena for the production of the books and records for the aforesaid purpose.
Those who refuse the subpoena without justifiable cause, or who refuse to supply the bank with data
requested or required, shall be subject to punishment for contempt in accordance with the provisions of
the Rules of Court.

Data on individual firms, other than banks, gathered by the Department of Economic Research and
other departments or units of the Bangko Sentral shall not be made available to any person or entity
outside of the Bangko Sentral whether public or private except under order of the court or under such
conditions as may be prescribed by the Monetary Board: Provided, however, That the collective data on
firms may be released to interested persons or entities: Provided, finally, That in the case of data on
banks, the provisions of Section 27 of this Act shall apply.

Section 24. Training of Technical Personnel. - The Bangko Sentral shall promote and sponsor the
training of technical personnel in the field of money and banking. Toward this end, the Bangko Sentral is
hereby authorized to defray the costs of study, at home or abroad, of qualified employees of the Bangko
Sentral, of promising university graduates or of any other qualified persons who shall be determined by
proper competitive examinations. The Monetary Board shall prescribe rules and regulations to govern the
training program of the Bangko Sentral.

Section 25. Supervision and Examination. - The Bangko Sentral shall have supervision over, and
conduct periodic or special examinations of, banking institutions and quasi-banks, including their
subsidiaries and affiliates engaged in allied activities.

For purposes of this section, a subsidiary means a corporation more than fifty percent (50%) of the
voting stock of which is owned by a bank or quasi-bank and an affiliate means a corporation the voting
stock of which, to the extent of fifty percent (50%) or less, is owned by a bank or quasi-bank or which is
related or linked to such institution or intermediary through common stockholders or such other factors as
may be determined by the Monetary Board.

The department heads and the examiners of the supervising and/or examining departments are
hereby authorized to administer oaths to any director, officer, or employee of any institution under their
respective supervision or subject to their examination and to compel the presentation of all books,
documents, papers or records necessary in their judgment to ascertain the facts relative to the true
condition of any institution as well as the books and records of persons and entities relative to or in
connection with the operations, activities or transactions of the institution under examination, subject to

212
the provision of existing laws protecting or safeguarding the secrecy or confidentiality of bank deposits as
well as investments of private persons, natural or juridical, in debt instruments issued by the Government.

No restraining order or injunction shall be issued by the court enjoining the Bangko Sentral from
examining any institution subject to supervision or examination by the Bangko Sentral, unless there is
convincing proof that the action of the Bangko Sentral is plainly arbitrary and made in bad faith and the
petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond
executed in favor of the Bangko Sentral, in an amount to be fixed by the court. The provisions of Rule 58
of the New Rules of Court insofar as they are applicable and not inconsistent with the provisions of this
section shall govern the issuance and dissolution of the restraining order or injunction contemplated in
this section.

Section 26. Bank Deposits and Investments. - Any director, officer or stockholder who, together
with his related interest, contracts a loan or any form of financial accommodation from: (1) his bank; or
(2) from a bank (a) which is a subsidiary of a bank holding company of which both his bank and the
lending bank are subsidiaries or (b) in which a controlling proportion of the shares is owned by the same
interest that owns a controlling proportion of the shares of his bank, in excess of five percent (5%) of the
capital and surplus of the bank, or in the maximum amount permitted by law, whichever is lower, shall be
required by the lending bank to waive the secrecy of his deposits of whatever nature in all banks in the
Philippines. Any information obtained from an examination of his deposits shall be held strictly
confidential and may be used by the examiners only in connection with their supervisory and examination
responsibility or by the Bangko Sentral in an appropriate legal action it has initiated involving the deposit
account.

Section 27. Prohibitions. - In addition to the prohibitions found in Republic Act Nos. 3019 and
6713, personnel of the Bangko Sentral are hereby prohibited from:

(a) being an officer, director, lawyer or agent, employee, consultant or stockholder, directly or
indirectly, of any institution subject to supervision or examination by the Bangko Sentral, except
non-stock savings and loan associations and provident funds organized exclusively for employees
of the Bangko Sentral, and except as otherwise provided in this Act;

(b) directly or indirectly requesting or receiving any gift, present or pecuniary or material benefit
for himself or another, from any institution subject to supervision or examination by the Bangko
Sentral;

(c) revealing in any manner, except under orders of the court, the Congress or any government
office or agency authorized by law, or under such conditions as may be prescribed by the
Monetary Board, information relating to the condition or business of any institution. This
prohibition shall not be held to apply to the giving of information to the Monetary Board or the
Governor of the Bangko Sentral, or to any person authorized by either of them, in writing, to
receive such information; and

(d) borrowing from any institution subject to supervision or examination by the Bangko Sentral
shall be prohibited unless said borrowings are adequately secured, fully disclosed to the Monetary
Board, and shall be subject to such further rules and regulations as the Monetary Board may
prescribe: Provided, however, That personnel of the supervising and examining departments are
prohibited from borrowing from a bank under their supervision or examination.

213
 Section 28. Examination and Fees. - The supervising and examining department head, personally
or by deputy, shall examine the books of every banking institution once in every twelve (12) months, and
at such other times as the Monetary Board by an affirmative vote of five (5) members, may deem
expedient and to make a report on the same to the Monetary Board: Provided, That there shall be an
interval of at least twelve (12) months between annual examinations.

The bank concerned shall afford to the head of the appropriate supervising and examining
departments and to his authorized deputies full opportunity to examine its books, cash and available assets
and general condition at any time during banking hours when requested to do so by the Bangko Sentral:
Provided, however, That none of the reports and other papers relative to such examinations shall be open
to inspection by the public except insofar as such publicity is incidental to the proceedings hereinafter
authorized or is necessary for the prosecution of violations in connection with the business of such
institutions.

Banking and quasi-banking institutions which are subject to examination by the Bangko Sentral
shall pay to the Bangko Sentral, within the first thirty (30) days of each year, an annual fee in an amount
equal to a percentage as may be prescribed by the Monetary Board of its average total assets during the
preceding year as shown on its end-of-month balance sheets, after deducting cash on hand and amounts
due from banks, including the Bangko Sentral and banks abroad.

Section 29. Appointment of Conservator. - Whenever, on the basis of a report submitted by the
appropriate supervising or examining department, the Monetary Board finds that a bank or a quasi-bank is
in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to
protect the interest of depositors and creditors, the Monetary Board may appoint a conservator with such
powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the
management thereof, reorganize the management, collect all monies and debts due said institution, and
exercise all powers necessary to restore its viability. The conservator shall report and be responsible to the
Monetary Board and shall have the power to overrule or revoke the actions of the previous management
and board of directors of the bank or quasi-bank.

The conservator should be competent and knowledgeable in bank operations and management.
The conservatorship shall not exceed one (1) year.

The conservator shall receive remuneration to be fixed by the Monetary Board in an amount not to
exceed two-thirds (2/3) of the salary of the president of the institution in one (1) year, payable in twelve
(12) equal monthly payments: Provided, That, if at any time within one-year period, the conservatorship
is terminated on the ground that the institution can operate on its own, the conservator shall receive the
balance of the remuneration which he would have received up to the end of the year; but if the
conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining
balance. The Monetary Board may appoint a conservator connected with the Bangko Sentral, in which
case he shall not be entitled to receive any remuneration or emolument from the Bangko Sentral during
the conservatorship. The expenses attendant to the conservatorship shall be borne by the bank or quasi-
bank concerned.

The Monetary Board shall terminate the conservatorship when it is satisfied that the institution can
continue to operate on its own and the conservatorship is no longer necessary. The conservatorship shall
likewise be terminated should the Monetary Board, on the basis of the report of the conservator or of its
own findings, determine that the continuance in business of the institution would involve probable loss to
its depositors or creditors, in which case the provisions of Section 30 shall apply.

214
 Section 30. Proceedings in Receivership and Liquidation. - Whenever, upon report of the head of
the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided,
That this shall not include inability to pay caused by extraordinary demands induced by financial
panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities;
or

(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has willfully violated a cease and desist order under Section 37 that has become final,
involving acts or transactions which amount to fraud or a dissipation of the assets of the
institution; in which cases, the Monetary Board may summarily and without need for prior
hearing forbid the institution from doing business in the Philippines and designate the Philippine
Deposit Insurance Corporation as receiver of the banking institution.

For a quasi-bank, any person of recognized competence in banking or finance may be designed as
receiver.

The receiver shall immediately gather and take charge of all the assets and liabilities of the
institution, administer the same for the benefit of its creditors, and exercise the general powers of a
receiver under the Revised Rules of Court but shall not, with the exception of administrative
expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the
institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative
investments. The receiver shall determine as soon as possible, but not later than ninety (90) days from
take over, whether the institution may be rehabilitated or otherwise placed in such a condition so that it
may be permitted to resume business with safety to its depositors and creditors and the general public:
Provided, That any determination for the resumption of business of the institution shall be subject to prior
approval of the Monetary Board.

If the receiver determines that the institution cannot be rehabilitated or permitted to resume
business in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the
board of directors of its findings and direct the receiver to proceed with the liquidation of the institution.
The receiver shall:

(1) file ex parte with the proper regional trial court, and without requirement of prior notice or
any other action, a petition for assistance in the liquidation of the institution pursuant to a
liquidation plan adopted by the Philippine Deposit Insurance Corporation for general application
to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary
Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice,
adjudicate disputed claims against the institution, assist the enforcement of individual liabilities
of the stockholders, directors and officers, and decide on other issues as may be material to
implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings from
the assets of the institution.

(2) convert the assets of the institutions to money, dispose of the same to creditors and other
parties, for the purpose of paying the debts of such institution in accordance with the rules on
concurrence and preference of credit under the Civil Code of the Philippines and he may, in the

215
 name of the institution, and with the assistance of counsel as he may retain, institute such actions
as may be necessary to collect and recover accounts and assets of, or defend any action against,
the institution. The assets of an institution under receivership or liquidation shall be deemed in
custodia legis in the hands of the receiver and shall, from the moment the institution was placed
under such receivership or liquidation, be exempt from any order of garnishment, levy,
attachment, or execution.

The actions of the Monetary Board taken under this section or under Section 29 of this Act shall
be final and executory, and may not be restrained or set aside by the court except on petition for certiorari
on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as
to amount to lack or excess of jurisdiction. The petition for certiorari may only be filed by the
stockholders of record representing the majority of the capital stock within ten (10) days from receipt by
the board of directors of the institution of the order directing receivership, liquidation or conservatorship.

The designation of a conservator under Section 29 of this Act or the appointment of a receiver
under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a
conservator is not a precondition to the designation of a receiver.

Section 31. Distribution of Assets. - In case of liquidation of a bank or quasi-bank, after payment
of the cost of proceedings, including reasonable expenses and fees of the receiver to be allowed by the
court, the receiver shall pay the debts of such institution, under order of the court, in accordance with the
rules on concurrence and preference of credit as provided in the Civil Code.

Section 32. Disposition of Revenues and Earnings. - All revenues and earnings realized by the
receiver in winding up the affairs and administering the assets of any bank or quasi-bank within the
purview of this Act shall be used to pay the costs, fees and expenses mentioned in the preceding section,
salaries of such personnel whose employment is rendered necessary in the discharge of the liquidation
together with other additional expenses caused thereby. The balance of revenues and earnings, after the
payment of all said expenses, shall form part of the assets available for payment to creditors.

Section 33. Disposition of Banking Franchise. - The Bangko Sentral may, if public interest so
requires, award to an institution, upon such terms and conditions as the Monetary Board may approve, the
banking franchise of a bank under liquidation to operate in the area where said bank or its branches were
previously operating: Provided, That whatever proceeds may be realized from such award shall be subject
to the appropriate exclusive disposition of the Monetary Board.

Section 34. Refusal to Make Reports or Permit Examination. - Any officer, owner, agent,
manager, director or officer-in-charge of any institution subject to the supervision or examination by the
Bangko Sentral within the purview of this Act who, being required in writing by the Monetary Board or
by the head of the supervising and examining department willfully refuses to file the required report or
permit any lawful examination into the affairs of such institution shall be punished by a fine of not less
than Fifty thousand pesos (P50,000) nor more than One hundred thousand pesos (P100,000) or by
imprisonment of not less than one (1) year nor more than five (5) years, or both, in the discretion of the
court.

Section 35. False Statement. - The willful making of a false or misleading statement on a material
fact to the Monetary Board or to the examiners of the Bangko Sentral shall be punished by a fine of not
less than One hundred thousand pesos (P100,000) nor more than Two hundred thousand pesos
(P200,000), or by imprisonment of not more than (5) years, or both, at the discretion of the court.

216
 Section 36. Proceedings Upon Violation of This Act and Other Banking Laws, Rules, Regulations,
Orders or Instructions. - Whenever a bank or quasi-bank, or whenever any person or entity willfully
violates this Act or other pertinent banking laws being enforced or implemented by the Bangko Sentral or
any order, instruction, rule or regulation issued by the Monetary Board, the person or persons responsible
for such violation shall unless otherwise provided in this Act be punished by a fine of not less than Fifty
thousand pesos (P50,000) nor more than Two hundred thousand pesos (P200,000) or by imprisonment of
not less than two (2) years nor more than ten (10) years, or both, at the discretion of the court.

Whenever a bank or quasi-bank persists in carrying on its business in an unlawful or unsafe

manner, the Board may, without prejudice to the penalties provided in the preceding paragraph of this
section and the administrative sanctions provided in Section 37 of this Act, take action under Section 30
of this Act.

Section 37. Administrative Sanctions on Banks and Quasi-banks. - Without prejudice to the
criminal sanctions against the culpable persons provided in Sections 34, 35, and 36 of this Act, the
Monetary Board may, at its discretion, impose upon any bank or quasi-bank, their directors and/or
officers, for any willful violation of its charter or by-laws, willful delay in the submission of reports or
publications thereof as required by law, rules and regulations; any refusal to permit examination into the
affairs of the institution; any willful making of a false or misleading statement to the Board or the
appropriate supervising and examining department or its examiners; any willful failure or refusal to
comply with, or violation of, any banking law or any order, instruction or regulation issued by the
Monetary Board, or any order, instruction or ruling by the Governor; or any commission of irregularities,
and/or conducting business in an unsafe or unsound manner as may be determined by the Monetary
Board, the following administrative sanctions, whenever applicable:

(a) fines in amounts as may be determined by the Monetary Board to be appropriate, but in no
case to exceed Thirty thousand pesos (P30,000) a day for each violation, taking into consideration
the attendant circumstances, such as the nature and gravity of the violation or irregularity and the
size of the bank or quasi-bank;

(b) suspension of rediscounting privileges or access to Bangko Sentral credit facilities;

(c) suspension of lending or foreign exchange operations or authority to accept new deposits or
make new investments;

(d) suspension of interbank clearing privileges; and/or

(e) revocation of quasi-banking license.

Resignation or termination from office shall not exempt such director or officer from
administrative or criminal sanctions.

The Monetary Board may, whenever warranted by circumstances, preventively suspend any
director or officer of a bank or quasi-bank pending an investigation: Provided, That should the case be not
finally decided by the Bangko Sentral within a period of one hundred twenty (120) days after the date of
suspension, said director or officer shall be reinstated in his position: Provided, further, That when the
delay in the disposition of the case is due to the fault, negligence or petition of the director or officer, the
period of delay shall not be counted in computing the period of suspension herein provided.

The above administrative sanctions need not be applied in the order of their severity.

217
 Whether or not there is an administrative proceeding, if the institution and/or the directors and/or
officers concerned continue with or otherwise persist in the commission of the indicated practice or
violation, the Monetary Board may issue an order requiring the institution and/or the directors and/or
officers concerned to cease and desist from the indicated practice or violation, and may further order that
immediate action be taken to correct the conditions resulting from such practice or violation. The cease
and desist order shall be immediately effective upon service on the respondents.

The respondents shall be afforded an opportunity to defend their action in a hearing before the
Monetary Board or any committee chaired by any Monetary Board member created for the purpose, upon
request made by the respondents within five (5) days from their receipt of the order. If no such hearing is
requested within said period, the order shall be final. If a hearing is conducted, all issues shall be
determined on the basis of records, after which the Monetary Board may either reconsider or make final
its order.

The Governor is hereby authorized, at his discretion, to impose upon banking institutions, for any
failure to comply with the requirements of law, Monetary Board regulations and policies, and/or
instructions issued by the Monetary Board or by the Governor, fines not in excess of Ten thousand pesos
(P10,000) a day for each violation, the imposition of which shall be final and executory until reversed,
modified or lifted by the Monetary Board on appeal.

Section 38. Operating Departments of the Bangko Sentral. - The Monetary Board shall, in
accordance with its authority under this Act, determine and provide for such operating departments and
other offices, including a public information office, of the Bangko Sentral as it deems convenient for the
proper and efficient conduct of the operations and the accomplishment of the objectives of the Bangko
Sentral. The functions and duties of such operating departments and other offices shall be determined by
the Monetary Board.

ARTICLE V
REPORTS AND PUBLICATIONS

Section 39. Reports and Publications. - The Bangko Sentral shall publish a general balance sheet
showing the volume and composition of its assets and liabilities as of the last working day of the month
within sixty (60) days after the end of each month except for the month of December, which shall be
submitted within ninety (90) days after the end hereof.

The Monetary Board shall publish and submit the following reports to the President and to the
Congress:

(a) not later than ninety (90) days after the end of each quarter, an analysis of economic and
financial developments, including the condition of net international reserves and monetary
aggregates;

(b) within ninety (90) days after the end of the year, the preceding year's budget and profit and
loss statement of the Bangko Sentral showing in reasonable detail the result of its operations;

(c) one hundred twenty (120) days after the end of each semester, a review of the state of the
financial system; and

218
 (d) as soon as practicable, abnormal movements in monetary aggregates and the general price
level, and, not later than seventy-two (72) hours after they are taken, remedial measures in
response to such abnormal movements.

Section 40. Annual Report. - Before the end of March of each year, the Bangko Sentral shall
publish and submit to the President and the Congress an annual report on the condition of the Bangko
Sentral including a review of the policies and measures adopted by the Monetary Board during the past
year and an analysis of the economic and financial circumstances which gave rise to said policies and
measures.

The annual report shall also include a statement of the financial condition of the Bangko Sentral
and a statistical appendix which shall present, as a minimum, the following data:

(a) the monthly movement of monetary aggregates and their components;

(b) the monthly movement of purchases and sales of foreign exchange and of the international
reserves of the Bangko Sentral;

(c) the balance of payments of the Philippines;

(d) monthly indices of consumer prices and of import and export prices;

(e) the monthly movement, in summary form, of exports and imports, by volume and value;

(f) the monthly movement of the accounts of the Bangko Sentral and of other banks;

(g) the principal data on government receipts and expenditures and on the status of the public
debt, both domestic and foreign; and

(h) the texts of the major legal and administrative measures adopted by the Government and the
Monetary Board during the year which relate to the functions or operations of the Bangko Sentral
or of the financial system.

The Bangko Sentral shall publish another version of the annual report in terms understandable to
the layman.

Failure to comply with the reportorial requirements pursuant to this article without justifiable
reason as may be determined by the Monetary Board shall cause the withholding of the salary of the
personnel concerned until the requirements are complied with.

Section 41. Signatures on Statements. - The balance sheets and other financial statements of the
Bangko Sentral shall be signed by the officers responsible for their preparation, by the Governor, and by
the auditor of the Bangko Sentral.

ARTICLE VI
PROFITS, LOSSES, AND SPECIAL ACCOUNTS

Section 42. Fiscal Year. - The fiscal year of the Bangko Sentral shall begin on January first and
end on December thirty-first of each year.

219
 Section 43. Computation of Profits and Losses. - Within the first thirty (30) days following the
end of each year, the Bangko Sentral shall determine its net profits or losses. In the calculation of net
profits, the Bangko Sentral shall make adequate allowance or establish adequate reserves for bad and
doubtful accounts.

Section 44. Distribution of Net Profits. - Within the first sixty (60) days following the end of each
fiscal year, the Monetary Board shall determine and carry out the distribution of the net profits, in
accordance with the following rule:

Fifty percent (50%) of the net profits shall be carried to surplus and the remaining fifty percent
(50%) shall revert back to the National Treasury, except as otherwise provided in the transitory provisions
of this Act.

Section 45. Revaluation Profits and Losses. - Profits or losses arising from any revaluation of the
Bangko Sentral's net assets or liabilities in gold or foreign currencies with respect to the Philippine peso
shall not be included in the computation of the annual profits and losses of the Bangko Sentral. Any
profits or losses arising in this manner shall be offset by any amounts which, as a consequence of such
revaluations, are owed by the Philippines to any international or regional intergovernmental financial
institution of which the Philippines is a member or are owed by these institutions to the Philippines. Any
remaining profit or loss shall be carried in a special frozen account which shall be named "Revaluation of
International Reserve" and the net balance of which shall appear either among the liabilities or among the
assets of the Bangko Sentral, depending on whether the revaluations have produced net profits or net
losses.

The Revaluation of International Reserve account shall be neither credited nor debited for any
purposes other than those specifically authorized in this section.

Section 46. Suspense Accounts. - Sections 43 and 43-A of Republic Act No. 265, as amended,
creating the Monetary Adjustment Account (MAA) and the Exchange Stabilization Adjustment Account
(ESAA), respectively, are hereby repealed. Amounts outstanding as of the effective date of this Act based
on these accounts shall continue to be for the account of the Central Bank and shall be governed by the
transitory provisions of this Act.

The Revaluation of International Reserve (RIR) account as of the effective date of this Act of the
Central Bank shall continue to be for the account of the same entity and shall be governed by the
provisions of Section 44 of Republic Act No. 265, as amended, until otherwise provided for in accordance
with the transitory provisions of this Act.

ARTICLE VII
THE AUDITOR

Section 47. Appointment and Personnel. - The Chairman of the Commission on Audit shall act as
the ex officio auditor of the Bangko Sentral and, as such, he is empowered and authorized to appoint a
representative who shall be the auditor of the Bangko Sentral and, in accordance with law, fix his salary,
and to appoint and fix salaries and number of personnel to assist said representative in his work. The
salaries and other emoluments shall be paid by the Commission. The auditor of the Bangko Sentral and
personnel under him may be removed only by the Chairman of the Commission.

The representative of the Chairman of the Commission must be a certified public accountant with
at least ten (10) years experience as such. No relative of any member of the Monetary Board or the

220
Chairman of the Commission within the sixth degree of consanguinity or affinity shall be appointed such
representative.

CHAPTER II THE BANGKO SENTRAL AND THE MEANS OF PAYMENT

ARTICLE I
THE UNIT OF MONETARY VALUE

Section 48. The Peso. - The unit of monetary value in the Philippines is the "peso," which is
represented by the sign "P."

The peso is divided into one hundred (100) equal parts called "centavos," which are represented
by the sign "c."

ARTICLE II
ISSUE OF MEANS OF PAYMENT

A. CURRENCY

Section 49. Definition of Currency. - The word "currency" is hereby defined, for purposes of this
Act, as meaning all Philippine notes and coins issued or circulating in accordance with the provisions of
this Act.

Section 50. Exclusive Issue Power. - The Bangko Sentral shall have the sole power and authority
to issue currency, within the territory of the Philippines. No other person or entity, public or private, may
put into circulation notes, coins or any other object or document which, in the opinion of the Monetary
Board, might circulate as currency, nor reproduce or imitate the facsimiles of Bangko Sentral notes
without prior authority from the Bangko Sentral.

The Monetary Board may issue such regulations as it may deem advisable in order to prevent the
circulation of foreign currency or of currency substitutes as well as to prevent the reproduction of
facsimiles of Bangko Sentral notes.

The Bangko Sentral shall have the authority to investigate, make arrests, conduct searches and
seizures in accordance with law, for the purpose of maintaining the integrity of the currency.

Violation of this provision or any regulation issued by the Bangko Sentral pursuant thereto shall
constitute an offense punishable by imprisonment of not less than five (5) years but not more than ten (10)
years. In case the Revised Penal Code provides for a greater penalty, then that penalty shall be imposed.

Section 51. Liability for Notes and Coins. - Notes and coins issued by the Bangko Sentral shall be
liabilities of the Bangko Sentral and may be issued only against, and in amounts not exceeding, the assets
of the Bangko Sentral. Said notes and coins shall be a first and paramount lien on all assets of the Bangko
Sentral.

The Bangko Sentral's holdings of its own notes and coins shall not be considered as part of its
currency issue and, accordingly, shall not form part of the assets or liabilities of the Bangko Sentral.

221
 Section 52. Legal Tender Power. - All notes and coins issued by the Bangko Sentral shall be fully
guaranteed by the Government of the Republic of the Philippines and shall be legal tender in the
Philippines for all debts, both public and private: Provided, however, That, unless otherwise fixed by the
Monetary Board, coins shall be legal tender in amounts not exceeding Fifty pesos (P50.00) for
denominations of Twenty-five centavos and above, and in amounts not exceeding Twenty pesos (P20.00)
for denominations of Ten centavos or less.

Section 53. Characteristics of the Currency. - The Monetary Board, with the approval of the
President of the Philippines, shall prescribe the denominations, dimensions, designs, inscriptions and
other characteristics of notes issued by the Bangko Sentral: Provided, however, That said notes shall state
that they are liabilities of the Bangko Sentral and are fully guaranteed by the Government of the Republic
of the Philippines. Said notes shall bear the signatures, in facsimile, of the President of the Philippines
and of the Governor of the Bangko Sentral.

Similarly, the Monetary Board, with the approval of the President of the Philippines, shall
prescribe the weight, fineness, designs, denominations and other characteristics of the coins issued by the
Bangko Sentral. In the minting of coins, the Monetary Board shall give full consideration to the
availability of suitable metals and to their relative prices and cost of minting.

Section 54. Printing of Notes and Mining of Coins. - The Monetary Board shall prescribe the
amounts of notes and coins to be printed and minted, respectively, and the conditions to which the
printing of notes and the minting of coins shall be subject. The Monetary Board shall have the authority to
contract institutions, mints or firms for such operations.

All expenses incurred in the printing of notes and the minting of coins shall be for the account of
the Bangko Sentral.

Section 55. Interconvertibility of Currency. - The Bangko Sentral shall exchange, on demand and
without charge, Philippine currency of any denomination for Philippine notes and coins of any other
denomination requested. If for any reason the Bangko Sentral is temporarily unable to provide notes or
coins of the denominations requested, it shall meet its obligations by delivering notes and coins of the
denominations which most nearly approximate those requested.

Section 56. Replacement of Currency Unfit for Circulation. - The Bangko Sentral shall withdraw
from circulation and shall demonetize all notes and coins which for any reason whatsoever are unfit for
circulation and shall replace them by adequate notes and coins: Provided, however, That the Bangko
Sentral shall not replace notes and coins the identification of which is impossible, coins which show signs
of filing, clipping or perforation, and notes which have lost more than two-fifths (2/5) of their surface or
all of the signatures inscribed thereon. Notes and coins in such mutilated conditions shall be withdrawn
from circulation and demonetized without compensation to the bearer.

Section 57. Retirement of Old Notes and Coins. - The Bangko Sentral may call in for replacement
notes of any series or denomination which are more than five (5) years old and coins which are more than
(10) years old.

Notes and coins called in for replacement in accordance with this provision shall remain legal
tender for a period of one (1) year from the date of call. After this period, they shall cease to be legal
tender but during the following year, or for such longer period as the Monetary Board may determine,
they may be exchanged at par and without charge in the Bangko Sentral and by agents duly authorized by
the Bangko Sentral for this purpose. After the expiration of this latter period, the notes and coins which

222
have not been exchanged shall cease to be a liability of the Bangko Sentral and shall be demonetized. The
Bangko Sentral shall also demonetize all notes and coins which have been called in and replaced.

B. DEMAND DEPOSITS

Section 58. Definition. - For purposes of this Act, the term "demand deposits" means all those
liabilities of the Bangko Sentral and of other banks which are denominated in Philippine currency and are
subject to payment in legal tender upon demand by the presentation of checks.

Section 59. Issue of Demand Deposits. - Only banks duly authorized to do so may accept funds or
create liabilities payable in pesos upon demand by the presentation of checks, and such operations shall
be subject to the control of the Monetary Board in accordance with the powers granted it with respect
thereto under this Act.

Section 60. Legal Character. - Checks representing demand deposits do not have legal tender
power and their acceptance in the payment of debts, both public and private, is at the option of the
creditor: Provided, however, That a check which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited
to his account.

CHAPTER III GUIDING PRINCIPLES OF MONETARY ADMINISTRATION BY THE

BANGKO SENTRAL

ARTICLE I
DOMESTIC MONETARY STABILIZATION

Section 61. Guiding Principle. - The Monetary Board shall endeavor to control any expansion or
contraction in monetary aggregates which is prejudicial to the attainment or maintenance of price
stability.

Section 62. Power to Define Terms. - For purposes of this article and of this Act, the Monetary
Board shall formulate definitions of monetary aggregates, credit and prices and shall make public such
definitions and any changes thereof.

Section 63. Action When Abnormal Movements Occur in the Monetary Aggregates, Credit, or
Price Level. - Whenever abnormal movements in the monetary aggregates, in credit, or in prices endanger
the stability of the Philippine economy or important sectors thereof, the Monetary Board shall:

(a) take such remedial measures as are appropriate and within the powers granted to the Monetary
Board and the Bangko Sentral under the provisions of this Act; and

(b) submit to the President of the Philippines and the Congress, and make public, a detailed report
which shall include, as a minimum, a description and analysis of:

(1) the causes of the rise or fall of the monetary aggregates, of credit or of prices;

(2) the extent to which the changes in the monetary aggregates, in credit, or in prices have
been reflected in changes in the level of domestic output, employment, wages and
economic activity in general, and the nature and significance of any such changes; and

223
 (3) the measures which the Monetary Board has taken and the other monetary, fiscal or
administrative measures which it recommends to be adopted.

Whenever the monetary aggregates, or the level of credit, increases or decreases by more than
fifteen percent (15%), or the cost of living index increases by more than ten percent (10%), in relation to
the level existing at the end of the corresponding month of the preceding year, or even though any of
these quantitative guidelines have not been reached when in its judgment the circumstances so warrant,
the Monetary Board shall submit the reports mentioned in this section, and shall state therein whether, in
the opinion of the Board, said changes in the monetary aggregates, credit or cost of living represent a
threat to the stability of the Philippine economy or of important sectors thereof.

The Monetary Board shall continue to submit periodic reports to the President of the Philippines
and to Congress until it considers that the monetary, credit or price disturbances have disappeared or have
been adequately controlled.

ARTICLE II
INTERNATIONAL MONETARY STABILIZATION

Section 64. International Monetary Stabilization. - The Bangko Sentral shall exercise its powers
under this Act to preserve the international value of the peso and to maintain its convertibility into other
freely convertible currencies primarily for, although not necessarily limited to, current payments for
foreign trade and invisibles.

Section 65. International Reserves. - In order to maintain the international stability and
convertibility of the Philippine peso, the Bangko Sentral shall maintain international reserves adequate to
meet any foreseeable net demands on the Bangko Sentral for foreign currencies.

In judging the adequacy of the international reserves, the Monetary Board shall be guided by the
prospective receipts and payments of foreign exchange by the Philippines. The Board shall give special
attention to the volume and maturity of the Bangko Sentral's own liabilities in foreign currencies, to the
volume and maturity of the foreign exchange assets and liabilities of other banks operating in the
Philippines and, insofar as they are known or can be estimated, the volume and maturity of the foreign
exchange assets and liabilities of all other persons and entities in the Philippines.

Section 66. Composition of the International Reserves. - The international reserves of the Bangko
Sentral may include but shall not be limited to the following assets:

(a) gold; and

(b) assets in foreign currencies in the form of: documents and instruments customarily employed
for the international transfer of funds; demand and time deposits in central banks, treasuries and
commercial banks abroad; foreign government securities; and foreign notes and coins.

The Monetary Board shall endeavor to hold the foreign exchange resources of the Bangko Sentral
in freely convertible currencies; moreover, the Board shall give particular consideration to the prospects
of continued strength and convertibility of the currencies in which the reserve is maintained, as well as to
the anticipated demands for such currencies. The Monetary Board shall issue regulations determining the
other qualifications which foreign exchange assets must meet in order to be included in the international
reserves of the Bangko Sentral.

224
 The Bangko Sentral shall be free to convert any of the assets in its international reserves into other
assets as described in subsections (a) and (b) of this section.

Section 67. Action When the International Stability of the Peso Is Threatened. - Whenever the
international reserve of the Bangko Sentral falls to a level which the Monetary Board considers
inadequate to meet prospective net demands on the Bangko Sentral for foreign currencies, or whenever
the international reserve appears to be in imminent danger of falling to such a level, or whenever the
international reserve is falling as a result of payments or remittances abroad which, in the opinion of the
Monetary Board, are contrary to the national welfare, the Monetary Board shall:

(a) take such remedial measures as are appropriate and within the powers granted to the Monetary
Board and the Bangko Sentral under the provisions of this Act; and

(b) submit to the President of the Philippines and to Congress a detailed report which shall
include, as a minimum, a description and analysis of:

(1) the nature and causes of the existing or imminent decline;

(2) the remedial measures already taken or to be taken by the Monetary Board;

(3) the monetary, fiscal or administrative measures further proposed; and

(4) the character and extent of the cooperation required from other government agencies
for the successful execution of the policies of the Monetary Board.

If the resultant actions fail to check the deterioration of the reserve position of the Bangko Sentral,
or if the deterioration cannot be checked except by chronic restrictions on exchange and trade transactions
or by sacrifice of the domestic objectives of a balanced and sustainable growth of the economy, the
Monetary Board shall propose to the President, with appropriate notice of the Congress, such additional
action as it deems necessary to restore equilibrium in the international balance of payments of the
Philippines.

The Monetary Board shall submit periodic reports to the President and to Congress until the threat
to the international monetary stability of the Philippines has disappeared.

CHAPTER IV INSTRUMENTS OF BANGKO SENTRAL ACTION

ARTICLE I
GENERAL CRITERION

Section 68. Means of Action. - In order to achieve the primary objective of price stability, the
Monetary Board shall rely on its moral influence and the powers granted to it under this Act for the
management of monetary aggregates.

ARTICLE II
OPERATIONS IN GOLD AND FOREIGN EXCHANGE

Section 69. Purchases and Sales of Gold. - The Bangko Sentral may buy and sell gold in any
form, subject to such regulations as the Monetary Board may issue.

225
 The purchases and sales of gold authorized by this section shall be made in the national currency
at the prevailing international market price as determined by the Monetary Board.

Section 70. Purchases and Sales of Foreign Exchange. - The Bangko Sentral may buy and sell
foreign notes and coins, and documents and instruments of types customarily employed for the
international transfer of funds. The Bangko Sentral may engage in future exchange operations.

The Bangko Sentral may engage in foreign exchange transactions with the following entities or
persons only:

(a) banking institutions operating in the Philippines;

(b) the Government, its political subdivisions and instrumentalities;

(c) foreign or international financial institutions;

(d) foreign governments and their instrumentalities; and

(e) other entities or persons which the Monetary Board is hereby empowered to authorize as
foreign exchange dealers, subject to such rules and regulations as the Monetary Board shall
prescribe.

In order to maintain the convertibility of the peso, the Bangko Sentral may, at the request of any
banking institution operating in the Philippines, buy any quantity of foreign exchange offered, and sell
any quantity of foreign exchange demanded, by such institution, provided that the foreign currencies so
offered or demanded are freely convertible into gold or United States dollars. This requirement shall not
apply to demands for foreign notes and coins.

The Bangko Sentral shall effect its exchange transactions between foreign currencies and the
Philippine peso at the rates determined in accordance with the provisions of Section 74 of this Act.

Section 71. Foreign Asset Position of the Bangko Sentral. - The Bangko Sentral shall endeavor to
maintain at all times a net positive foreign asset position so that its gross foreign exchange assets will
always exceed its gross foreign liabilities. In the event that the equivalent amount in pesos of the foreign
exchange liabilities of the Bangko Sentral exceed twice the equivalent amount in pesos of the foreign
exchange assets of the bank, the Bangko Sentral shall, within sixty (60) days from the date the limit is
exceeded, submit a report to the Congress stating the origin of these liabilities, and the manner in which
they will be paid.

Section 72. Emergency Restrictions on Exchange Operations. - In order to achieve the primary
objective of the Bangko Sentral as set forth in Section 3 of this Act, or protect the international reserves of
the Bangko Sentral in the imminence of, or during an exchange crisis, or in time of national emergency
and to give the Monetary Board and the Government time in which to take constructive measures to
forestall, combat, or overcome such a crisis or emergency, the Monetary Board, with the concurrence of
at least five (5) of its members and with the approval of the President of the Philippines, may temporarily
suspend or restrict sales of exchange by the Bangko Sentral, and may subject all transactions in gold and
foreign exchange to license by the Bangko Sentral, and may require that any foreign exchange thereafter
obtained by any person residing or entity operating in the Philippines be delivered to the Bangko Sentral
or to any bank or agent designated by the Bangko Sentral for the purpose, at the effective exchange rate or

226
rates: Provided, however, That foreign currency deposits made under Republic Act No. 6426 shall be
exempt from these requirements.

Section 73. Acquisition of Inconvertible Currencies. - The Bangko Sentral shall avoid the
acquisition and holding of currencies which are not freely convertible, and may acquire such currencies in
an amount exceeding the minimum balance necessary to cover current demands for said currencies only
when, and to the extent that, such acquisition is considered by the Monetary Board to be in the national
interest. The Monetary Board shall determine the procedures which shall apply to the acquisition and
disposition by the Bangko Sentral of foreign exchange which is not freely utilizable in the international
market.

Section 74. Exchange Rates. - The Monetary Board shall determine the exchange rate policy of
the country.

The Monetary Board shall determine the rates at which the Bangko Sentral shall buy and sell spot
exchange, and shall establish deviation limits from the effective exchange rate or rates as it may deem
proper. The Bangko Sentral shall not collect any additional commissions or charges of any sort, other than
actual telegraphic or cable costs incurred by it.

The Monetary Board shall similarly determine the rates for other types of foreign exchange
transactions by the Bangko Sentral, including purchases and sales of foreign notes and coins, but the
margins between the effective exchange rates and the rates thus established may not exceed the
corresponding margins for spot exchange transactions by more than the additional costs or expenses
involved in each type of transactions.

Section 75. Operations with Foreign Entities. - The Monetary Board may authorize the Bangko
Sentral to grant loans to and receive loans from foreign banks and other foreign or international entities,
both public and private, and may engage in such other operations with these entities as are in the national
interest and are appropriate to its character as a central bank. The Bangko Sentral may also act as agent or
correspondent for such entities.

Upon authority of the Monetary Board, the Bangko Sentral may pledge any gold or other assets
which it possesses as security against loans which it receives from foreign or international entities.

ARTICLE III
REGULATION OF FOREIGN EXCHANGE OPERATIONS OF THE BANKS

Section 76. Foreign Exchange Holdings of the Banks. - In order that the Bangko Sentral may at all
times have foreign exchange resources sufficient to enable it to maintain the international stability and
convertibility of the peso, or in order to promote the domestic investment of bank resources, the Monetary
Board may require the banks to sell to the Bangko Sentral or to other banks all or part of their surplus
holdings of foreign exchange. Such transfers may be required for all foreign currencies or for only certain
of such currencies, according to the decision of the Monetary Board. The transfers shall be made at the
rates established under the provisions of Section 74 of this Act.

The Monetary Board may, whenever warranted, determine the net assets and net liabilities of
banks and shall, in making such a determination, take into account the bank's networth, outstanding
liabilities, actual and contingent, or such other financial or performance ratios as may be appropriate
under the circumstances. Any such determination of net assets and net liabilities shall be applied in all
banks uniformly and without discrimination.

227
 Section 77. Requirement of Balanced Currency Position. - The Monetary Board may require the
banks to maintain a balanced position between their assets and liabilities in Philippine pesos or in any
other currency or currencies in which they operate. The banks shall be granted a reasonable period of time
in which to adjust their currency positions to any such requirement.

The powers granted under this section shall be exercised only when special circumstances make
such action necessary, in the opinion of the Monetary Board, and shall be applied to all banks alike and
without discrimination.

Section 78. Regulation of Non-spot Exchange Transactions. - In order to restrain the banks from
taking speculative positions with respect to future fluctuations in foreign exchange rates, the Monetary
Board may issue such regulations governing bank purchases and sales of non-spot exchange as it may
consider necessary for said purpose.

Section 79. Other Exchange Profits and Losses. - The banks shall bear the risks of non-
compliance with the terms of the foreign exchange documents and instruments which they buy and sell,
and shall also bear any other typically commercial or banking risks, including exchange risks not assumed
by the Bangko Sentral under the provisions of the preceding section.

Section 80. Information on Exchange Operations. - The banks shall report to the Bangko Sentral
the volume and composition of their purchases and sales of gold and foreign exchange each day, and must
furnish such additional information as the Bangko Sentral may request with reference to the movements
in their accounts in foreign currencies.

The Monetary Board may also require other persons and entities to report to it currently all
transactions or operations in gold, in any shape or form, and in foreign exchange whether entered into or
undertaken by them directly or through agents, or to submit such data as may be required on operations or
activities giving rise to or in connection with or relating to a gold or foreign exchange transaction. The
Monetary Board shall prescribe the forms on which such declarations must be made. The accuracy of the
declarations may be verified by the Bangko Sentral by whatever inspection it may deem necessary.

ARTICLE IV
LOANS TO BANKING AND OTHER FINANCIAL INSTITUTIONS

A. CREDIT POLICY

Section 81. Guiding Principles. - The rediscounts, discounts, loans and advances which the
Bangko Sentral is authorized to extend to banking institutions under the provisions of the present article
of this Act shall be used to influence the volume of credit consistent with the objective of price stability.

B. NORMAL CREDIT OPERATIONS

Section 82. Authorized Types of Operations. - Subject to the principle stated in the preceding
section of this Act, the Bangko Sentral may normally and regularly carry on the following credit
operations with banking institutions operating in the Philippines:

(a) Commercial credits. - The Bangko Sentral may rediscount, discount, buy and sell bills,
acceptances, promissory notes and other credit instruments with maturities of not more than one
hundred eighty (180) days from the date of their rediscount, discount or acquisition by the
Bangko Sentral and resulting from transactions related to:

228
 (1) the importation, exportation, purchase or sale of readily saleable goods and products,
or their transportation within the Philippines; or

(2) the storing of non-perishable goods and products which are duly insured and
deposited, under conditions assuring their preservation, in authorized bonded warehouses
or in other places approved by the Monetary Board.

(b) Production credits. - The Bangko Sentral may rediscount, discount, buy and sell bills,
acceptances, promissory notes and other credit instruments having maturities of not more than
three hundred sixty (360) days from the date of their rediscount, discount or acquisition by the
Bangko Sentral and resulting from transactions related to the production or processing of
agricultural, animal, mineral, or industrial products. Documents or instruments acquired in
accordance with this subsection shall be secured by a pledge of the respective crops or products:
Provided, however, That the crops or products need not be pledged to secure the documents if the
original loan granted by the Bangko Sentral is secured by a lien or mortgage on real estate
property seventy percent (70%) of the appraised value of which equals or exceeds the amount of
the loan granted.

(c) Other credits. - Special credit instruments not otherwise rediscountable under the immediately
preceding subsections (a) and (b) may be eligible for rediscounting in accordance with rules and
regulations which the Bangko Sentral shall prescribe. Whenever necessary, the Bangko Sentral
shall provide funds from non-inflationary sources: Provided, however, That the Monetary Board
shall prescribe additional safeguards for disbursing these funds.

(d) Advances. - The Bangko Sentral may grant advances against the following kinds of collaterals
for fixed periods which, with the exception of advances against collateral named in clause (4) of
the present subsection, shall not exceed one hundred eighty (180) days:

(1) gold coins or bullion;

(2) securities representing obligations of the Bangko Sentral or of other domestic

institutions of recognized solvency;

(3) the credit instruments to which reference is made in subsection (a) of this section;

(4) the credit instruments to which reference is made in subsection (b) of this section, for
periods which shall not exceed three hundred sixty (360) days;

(5) utilized portions of advances in current amount covered by regular overdraft

agreements related to operations included under subsections (a) and (b) of this section,
and certified as to amount and liquidity by the institution soliciting the advance;

(6) negotiable treasury bills, certificates of indebtedness, notes and other negotiable
obligations of the Government maturing within three (3) years from the date of the
advance; and

(7) negotiable bonds issued by the Government of the Philippines, by Philippine

provincial, city or municipal governments, or by any Philippine Government
instrumentality, and having maturities of not more than ten (10) years from the date of
advance.

229
The rediscounts, discounts, loans and advances made in accordance with the provisions of this section
may not be renewed or extended unless extraordinary circumstances fully justify such renewal or
extension.

Advances made against the collateral named in clauses (6) and (7) of subsection (d) of this section
may not exceed eighty percent (80%) of the current market value of the collateral.

C. SPECIAL CREDIT OPERATION

Section 83. Loans for Liquidity Purposes. - The Bangko Sentral may extend loans and advances to
banking institutions for a period of not more than seven (7) days without any collateral for the purpose of
providing liquidity to the banking system in times of need.

D. EMERGENCY CREDIT OPERATION

Section 84. Emergency Loans and Advances. - In periods of national and/or local emergency or of
imminent financial panic which directly threaten monetary and banking stability, the Monetary Board
may, by a vote of at least five (5) of its members, authorize the Bangko Sentral to grant extraordinary
loans or advances to banking institutions secured by assets as defined hereunder: Provided, That while
such loans or advances are outstanding, the debtor institution shall not, except upon prior authorization by
the Monetary Board, expand the total volume of its loans or investments.

The Monetary Board may, at its discretion, likewise authorize the Bangko Sentral to grant
emergency loans or advances to banking institutions, even during normal periods, for the purpose of
assisting a bank in a precarious financial condition or under serious financial pressures brought by
unforeseen events, or events which, though foreseeable, could not be prevented by the bank concerned:
Provided, however, That the Monetary Board has ascertained that the bank is not insolvent and has the
assets defined hereunder to secure the advances: Provided, further, That a concurrent vote of at least five
(5) members of the Monetary Board is obtained.

The amount of any emergency loan or advance shall not exceed the sum of fifty percent (50%) of
total deposits and deposit substitutes of the banking institution and shall be disbursed in two (2) or more
tranches. The amount of the first tranche shall be limited to twenty-five percent (25%) of the total deposit
and deposit substitutes of the institution and shall be secured by government securities to the extent of
their applicable loan values and other unencumbered first class collaterals which the Monetary Board may
approve: Provided, That if as determined by the Monetary Board, the circumstances surrounding the
emergency warrant a loan or advance greater than the amount provided hereinabove, the amount of the
first tranche may exceed twenty-five percent (25%) of the bank's total deposit and deposit substitutes if
the same is adequately secured by applicable loan values of government securities and unencumbered first
class collaterals approved by the Monetary Board, and the principal stockholders of the institution furnish
an acceptable undertaking to indemnify and hold harmless from suit a conservator whose appointment the
Monetary Board may find necessary at any time.

Prior to the release of the first tranche, the banking institution shall submit to the Bangko Sentral a
resolution of its board of directors authorizing the Bangko Sentral to evaluate other assets of the banking
institution certified by its external auditor to be good and available for collateral purposes should the
release of the subsequent tranche be thereafter applied for.

The Monetary Board may, by a vote of at least five (5) of its members, authorize the release of a
subsequent tranche on condition that the principal stockholders of the institution:

230
 (a) furnish an acceptable undertaking to indemnify and hold harmless from suit a conservator
whose appointment the Monetary Board may find necessary at any time; and

(b) provide acceptable security which, in the judgment of the Monetary Board, would be adequate
to supplement, where necessary, the assets tendered by the banking institution to collateralize the
subsequent tranche.

In connection with the exercise of these powers, the prohibitions in Section 128 of this Act shall
not apply insofar as it refers to acceptance as collateral of shares and their acquisition as a result of
foreclosure proceedings, including the exercise of voting rights pertaining to said shares: Provided,
however, That should the Bangko Sentral acquire any of the shares it has accepted as collateral as a result
of foreclosure proceedings, the Bangko Sentral shall dispose of said shares by public bidding within one
(1) year from the date of consolidation of title by the Bangko Sentral.

Whenever a financial institution incurs an overdraft in its account with the Bangko Sentral, the
same shall be eliminated within the period prescribed in Section 102 of this Act.

E. CREDIT TERMS

Section 85. Interest and Rediscount. - The Bangko Sentral shall collect interest and other
appropriate charges on all loans and advances it extends, the closure, receivership or liquidations of the
debtor-institution notwithstanding. This provision shall apply prospectively.

The Monetary Board shall fix the interest and rediscount rates to be charged by the Bangko
Sentral on its credit operations in accordance with the character and term of the operation, but after due
consideration has been given to the credit needs of the market, the composition of the Bangko Sentral's
portfolio, and the general requirements of the national monetary policy. Interest and rediscount rates shall
be applied to all banks of the same category uniformly and without discrimination.

Section 86. Endorsement. - The documents rediscounted, discounted, bought or accepted as

collateral by the Bangko Sentral in the course of the credit operations authorized in this article shall bear
the endorsement of the institution from which they are received.

Section 87. Repayment of Credits. - Documents rediscounted, discounted or accepted as collateral

by the Bangko Sentral must be withdrawn by the borrowing institution on the dates of their maturities, or
upon liquidation of the obligations which they represent or to which they relate whenever said obligations
have been liquidated prior to their dates of maturity.

Banks shall have the right at any time to withdraw any documents which they have presented to
the Bangko Sentral as collateral, upon payment in full of the corresponding debt to the Bangko Sentral,
including interest charges.

Section 88. Other requirements. - The Monetary Board may prescribe, within the general powers
granted to it under this Act, additional conditions which borrowing institutions must satisfy in order to
have access to the credit of the Bangko Sentral. These conditions may refer to the rates of interest charged
by the banks, to the purposes for which their loans in general are destined, and to any other clearly
definable aspect of the credit policy of the bank.

Section 89. Provisional Advances to the National Government. - The Bangko Sentral may make
direct provisional advances with or without interest to the National Government to finance expenditures

231
authorized in its annual appropriation: Provided, That said advances shall be repaid before the end of
three (3) months extendible by another three (3) months as the Monetary Board may allow following the
date the National Government received such provisional advances and shall not, in their aggregate,
exceed twenty percent (20%) of the average annual income of the borrower for the last three (3)
preceding fiscal years.

ARTICLE V
OPEN MARKET OPERATIONS FOR THE ACCOUNT OF THE BANGKO SENTRAL

Section 90. Principles of Open Market Operations. - The open market purchases and sales of
securities by the Bangko Sentral shall be made exclusively in accordance with its primary objective of
achieving price stability.

Section 91. Purchases and Sales of Government Securities. - In order to achieve the objectives of
the national monetary policy, the Bangko Sentral may, in accordance with the principle stated in Section
90 of this Act and with such rules and regulations as may be prescribed by the Monetary Board, buy and
sell in the open market for its own account:

(a) evidences of indebtedness issued directly by the Government of the Philippines or by its
political subdivisions; and

(b) evidences of indebtedness issued by government instrumentalities and fully guaranteed by the
Government.

The evidences of indebtedness acquired under the provisions of this section must be freely
negotiable and regularly serviced and must be available to the general public through banking institutions
and local government treasuries in denominations of a thousand pesos or more.

Section 92. Issue and Negotiation of Bangko Sentral Obligations. - In order to provide the Bangko
Sentral with effective instruments for open market operations, the Bangko Sentral may, subject to such
rules and regulations as the Monetary Board may prescribe and in accordance with the principles stated in
Section 90 of this Act, issue, place, buy and sell freely negotiable evidences of indebtedness of the
Bangko Sentral: Provided, That issuance of such certificates of indebtedness shall be made only in cases
of extraordinary movement in price levels. Said evidences of indebtedness may be issued directly against
the international reserve of the Bangko Sentral or against the securities which it has acquired under the
provisions of Section 91 of this Act, or may be issued without relation to specific types of assets of the
Bangko Sentral.

The Monetary Board shall determine the interest rates, maturities and other characteristics of said
obligations of the Bangko Sentral, and may, if it deems it advisable, denominate the obligations in gold or
foreign currencies.

Subject to the principles stated in Section 90 of this Act, the evidences of indebtedness of the
Bangko Sentral to which this section refers may be acquired by the Bangko Sentral before their maturity,
either through purchases in the open market or through redemptions at par and by lot if the Bangko
Sentral has reserved the right to make such redemptions. The evidences of indebtedness acquired or
redeemed by the Bangko Sentral shall not be included among its assets, and shall be immediately retired
and cancelled.

232
 ARTICLE VI
COMPOSITION OF BANGKO SENTRAL'S PORTFOLIO

Section 93. Review of the Bangko Sentral's Portfolio. - At least once every month the Monetary
Board shall review the portfolio of the Bangko Sentral in relation to its future credit policy.

In reviewing the Bangko Sentral's portfolio, the Monetary Board shall especially consider whether
a sufficiently large part of the portfolio consists of assets with early maturities, in order that a contraction
in Bangko Sentral credit may be effected promptly whenever the national monetary policy so requires.

ARTICLE VII
BANK RESERVES

Section 94. Reserve Requirements. - In order to control the volume of money created by the credit
operations of the banking system, all banks operating in the Philippines shall be required to maintain
reserves against their deposit liabilities: Provided, That the Monetary Board may, at its discretion, also
require all banks and/or quasi-banks to maintain reserves against funds held in trust and liabilities for
deposit substitutes as defined in this Act. The required reserves of each bank shall be proportional to the
volume of its deposit liabilities and shall ordinarily take the form of a deposit in the Bangko Sentral.
Reserve requirements shall be applied to all banks of the same category uniformly and without
discrimination.

Reserves against deposit substitutes, if imposed, shall be determined in the same manner as
provided for reserve requirements against regular bank deposits, with respect to the imposition, increase,
and computation of reserves.

The Monetary Board may exempt from reserve requirements deposits and deposit substitutes with
remaining maturities of two (2) years or more, as well as interbank borrowings.

Since the requirement to maintain bank reserves is imposed primarily to control the volume of
money, the Bangko Sentral shall not pay interest on the reserves maintained with it unless the Monetary
Board decides otherwise as warranted by circumstances.

Section 95. 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. 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 96. Required Reserves Against Peso Deposits. - The Monetary Board may fix and, when
it deems necessary, alter the minimum reserve ratios to peso deposits, as well as to deposit substitutes,
which each bank and/or quasi-bank may maintain, and such ratio shall be applied uniformly to all banks
of the same category as well as to quasi-banks.

233
 Section 97. Required Reserves Against Foreign Currency Deposits. - The Monetary Board is
similarly authorized to prescribe and modify the minimum reserve ratios applicable to deposits
denominated in foreign currencies.

Section 98. Reserves Against Unused Balances of Overdraft Lines. - In order to facilitate Bangko
Sentral control over the volume of bank credit, the Monetary Board may establish minimum reserve
requirements for unused balances of overdraft lines.

The powers of the Monetary Board to prescribe and modify reserve requirements against unused
balances of overdraft lines shall be the same as its powers with respect to reserve requirements against
demand deposits.

Section 99. Increase in Reserve Requirements. - Whenever in the opinion of the Monetary Board
it becomes necessary to increase reserve requirements against existing liabilities, the increase shall be
made in a gradual manner and shall not exceed four percentage points in any thirty-day period. Banks and
other affected financial institutions shall be notified reasonably in advance of the date on which such
increase is to become effective.

Section 100. Computation on Reserves. - The reserve position of each bank or quasi-bank shall be
calculated daily on the basis of the amount, at the close of business for the day, of the institution's
reserves and the amount of its liability accounts against which reserves are required to be maintained:
Provided, That with reference to holidays or non-banking days, the reserve position as calculated at the
close of the business day immediately preceding such holidays and non-banking days shall apply on such
days.

For the purpose of computing the reserve position of each bank or quasi-bank, its principal office
in the Philippines and all its branches and agencies located therein shall be considered as a single unit.

Section 101. Reserve Deficiencies. - Whenever the reserve position of any bank or quasi-bank,
computed in the manner specified in the preceding section of this Act, is below the required minimum,
the bank or quasi-bank shall pay the Bangko Sentral one-tenth of one percent (1/10 of 1%) per day on the
amount of the deficiency or the prevailing ninety-one-day treasury bill rate plus three percentage points,
whichever is higher: Provided, however, That banks and quasi-banks shall ordinarily be permitted to
offset any reserve deficiency occurring on one or more days of the week with any excess reserves which
they may hold on other days of the same week and shall be required to pay the penalty only on the
average daily deficiency during the week. In cases of abuse, the Monetary Board may deny any bank or
quasi-bank the privilege of offsetting reserve deficiencies in the aforesaid manner.

If a bank or quasi-bank chronically has a reserve deficiency, the Monetary Board may limit or
prohibit the making of new loans or investments by the institution and may require that part or all of the
net profits of the institution be assigned to surplus.

The Monetary Board may modify or set aside the reserve deficiency penalties provided in this
section, for part or the entire period of a strike or lockout affecting a bank or a quasi-bank as defined in
the Labor Code, or of a national emergency affecting operations of banks or quasi-banks. The Monetary
Board may also modify or set aside reserved deficiency penalties for rehabilitation program of a bank.

Section 102. Interbank Settlement. - The Bangko Sentral shall establish facilities for interbank
clearing under such rules and regulations as the Monetary Board may prescribe: Provided, That the
Bangko Sentral may charge administrative and other fees for the maintenance of such facilities.

234
 The deposit reserves maintained by the banks in the Bangko Sentral in accordance with the
provisions of Section 94 of this Act shall serve as basis for the clearing of checks and the settlement of
interbank balances, subject to such rules and regulations as the Monetary Board may issue with respect to
such operations: Provided, That any bank which incurs on overdrawing in its deposit account with the
Bangko Sentral shall fully cover said overdraft, including interest thereon at a rate equivalent to one-tenth
of one percent (1/10 of 1%) per day or the prevailing ninety-one-day treasury bill rate plus three
percentage points, whichever is higher, not later than the next clearing day: Provided, further, That
settlement of clearing balances shall not be effected for any account which continues to be overdrawn for
five (5) consecutive banking days until such time as the overdrawing is fully covered or otherwise
converted into an emergency loan or advance pursuant to the provisions of Section 84 of this Act:
Provided, finally, That the appropriate clearing office shall be officially notified of banks with overdrawn
balances. Banks with existing overdrafts with the Bangko Sentral as of the effectivity of this Act shall,
within such period as may be prescribed by the Monetary Board, either convert the overdraft into an
emergency loan or advance with a plan of payment, or settle such overdrafts, and that, upon failure to so
comply herewith, the Bangko Sentral shall take such action against the bank as may be warranted under
this Act.

Section 103. Exemption from Attachment and Other Purposes. - Deposits maintained by banks
with the Bangko Sentral as part of their reserve requirements shall be exempt from attachment,
garnishments, or any other order or process of any court, government agency or any other administrative
body issued to satisfy the claim of a party other than the Government, or its political subdivisions or
instrumentalities.

ARTICLE VIII
SELECTIVE REGULATION OF BANK OPERATIONS

Section 104. Guiding Principle. - The Monetary Board shall use the powers granted to it under
this Act to ensure that the supply, availability and cost of money are in accord with the needs of the
Philippine economy and that bank credit is not granted for speculative purposes prejudicial to the national
interests. Regulations on bank operations shall be applied to all banks of the same category uniformly and
without discrimination.

Section 105. Margin Requirements Against Letters of Credit. - The Monetary Board may at any
time prescribe minimum cash margins for the opening of letters of credit, and may relate the size of the
required margin to the nature of the transaction to be financed.

Section 106. Required Security Against Bank Loans. - In order to promote liquidity and solvency
of the banking system, the Monetary Board may issue such regulations as it may deem necessary with
respect to the maximum permissible maturities of the loans and investments which the banks may make,
and the kind and amount of security to be required against the various types of credit operations of the
banks.

Section 107. Portfolio Ceilings. - Whenever the Monetary Board considers it advisable to prevent
or check an expansion of bank credit, the Board may place an upper limit on the amount of loans and
investments which the banks may hold, or may place a limit on the rate of increase of such assets within
specified periods of time. The Monetary Board may apply such limits to the loans and investments of
each bank or to specific categories thereof.

235
 In no case shall the Monetary Board establish limits which are below the value of the loans or
investments of the banks on the date on which they are notified of such restrictions. The restrictions shall
be applied to all banks uniformly and without discrimination.

Section 108. Minimum Capital Ratios. - The Monetary Board may prescribe minimum ratios
which the capital and surplus of the banks must bear to the volume of their assets, or to specific categories
thereof, and may alter said ratios whenever it deems necessary.

ARTICLE IX
COORDINATION OF CREDIT POLICIES BY GOVERNMENT INSTITUTIONS

Section 109. Coordination of Credit Policies. - Government-owned corporations which perform

banking or credit functions shall coordinate their general credit policies with those of the Monetary
Board.

Toward this end, the Monetary Board may, whenever it deems it expedient, make suggestions or
recommendations to such corporations for the more effective coordination of their policies with those of
the Bangko Sentral.

CHAPTER V FUNCTIONS AS BANKER AND FINANCIAL ADVISOR OF THE

GOVERNMENT

ARTICLE I

FUNCTIONS AS BANKER OF THE GOVERNMENT

Section 110. Designation of Bangko Sentral as Banker of the Government. - The Bangko Sentral
shall act as a banker of the Government, its political subdivisions and instrumentalities.

Section 111. Representation with the International Monetary Fund. - The Bangko Sentral shall
represent the Government in all dealings, negotiations and transactions with the International Monetary
Fund and shall carry such accounts as may result from Philippine membership in, or operations with, said
Fund.

Section 112. Representation with Other Financial Institutions. - The Bangko Sentral may be
authorized by the Government to represent it in dealings, negotiations or transactions with the
International Bank for Reconstruction and Development and with other foreign or international financial
institutions or agencies. The President may, however, designate any of his other financial advisors to
jointly represent the Government in such dealings, negotiations or transactions.

Section 113. Official Deposits. - The Bangko Sentral shall be the official depository of the
Government, its political subdivisions and instrumentalities as well as of government-owned or controlled
corporations and, as a general policy, their cash balances should be deposited with the Bangko Sentral,
with only minimum working balances to be held by government-owned banks and such other banks
incorporated in the Philippines as the Monetary Board may designate, subject to such rules and
regulations as the Board may prescribe: Provided, That such banks may hold deposits of the political
subdivisions and instrumentalities of the Government beyond their minimum working balances whenever
such subdivisions or instrumentalities have outstanding loans with said banks.

236
 The Bangko Sentral may pay interest on deposits of the Government or of its political
subdivisions and instrumentalities, as well as on deposits of banks with the Bangko Sentral.

Section 114. Fiscal Operations. - The Bangko Sentral shall open a general cash account for the
Treasurer of the Philippines, in which the liquid funds of the Government shall be deposited.

Transfers of funds from this account to other accounts shall be made only upon order of the
Treasurer of the Philippines.

Section 115. Other Banks as Agents of the Bangko Sentral. - In the performance of its functions as
fiscal agent, the Bangko Sentral may engage the services of other government-owned and controlled
banks and of other domestic banks for operations in localities at home or abroad in which the Bangko
Sentral does not have offices or agencies adequately equipped to perform said operations: Provided,
however, That for fiscal operations in foreign countries, the Bangko Sentral may engage the services of
foreign banking and financial institutions.

Section 116. Remuneration for Services. - The Bangko Sentral may charge equitable rates,
commissions or fees for services which it renders to the Government, its political subdivisions and
instrumentalities.

ARTICLE II
THE MARKETING AND STABILIZATION OF SECURITIES FOR THE ACCOUNT OF THE
GOVERNMENT

A. THE ISSUE AND PLACING OF GOVERNMENT SECURITIES

Section 117. Issue of Government Obligations. - The issue of securities representing obligations
of the Government, its political subdivisions or instrumentalities, may be made through the Bangko
Sentral, which may act as agent of, and for the account of, the Government or its respective subdivisions
or instrumentality, as the case may be: Provided, however, That the Bangko Sentral shall not guarantee
the placement of said securities, and shall not subscribe to their issue except to replace its maturing
holdings of securities with the same type as the maturing securities.

Section 118. Methods of Placing Government Securities. - The Bangko Sentral may place the
securities to which the preceding section refers through direct sale to financial institutions and the public.

The Bangko Sentral shall not be a member of any stock exchange or syndicate, but may intervene
therein for the sole purpose of regulating their operations in the placing of government securities.

The Government, or its political subdivisions or instrumentalities, shall reimburse the Bangko
Sentral for the expenses incurred in the placing of the aforesaid securities.

Section 119. Servicing and Redemption of the Public Debt. - The servicing and redemption of the
public debt shall also be effected through the Bangko Sentral.

B. BANGKO SENTRAL SUPPORT OF THE GOVERNMENT SECURITIES MARKET

237
 Section 120. The Securities Stabilization Fund. - There shall be established a "Securities
Stabilization Fund" which shall be administered by the Bangko Sentral for the account of the
Government.

The operations of the Securities Stabilization Fund shall consist of purchases and sales, in the
open market, of bonds and other evidences of indebtedness issued or fully guaranteed by the Government.
The purpose of these operations shall be to increase the liquidity and stabilize the value of said securities
in order thereby to promote investment in government obligations.

The Monetary Board shall use the resources of the Fund to prevent, or moderate, sharp
fluctuations in the quotations of said government obligations, but shall not endeavor to alter movements
of the market resulting from basic changes in the pattern or level of interest rates.

The Monetary Board shall issue such regulations as may be necessary to implement the provisions
of this section.

Section 121. Resources of the Securities Stabilization Fund. - Subject to Section 132 of this Act,
the resources of the Securities Stabilization Fund shall come from the balance of the fund as held by the
Central Bank under Republic Act No. 265 as of the effective date of this Act.

Section 122. Profits and Losses of the Fund. - The Securities Stabilization Fund shall retain net
profits which it may make on its operations, regardless of whether said profits arise from capital gains or
from interest earnings. The Fund shall correspondingly bear any net losses which it may incur.

ARTICLE III
FUNCTIONS AS FINANCIAL ADVISOR OF THE GOVERNMENT

Section 123. Financial Advice on Official Credit Operations. - Before undertaking any credit
operation abroad, the Government, through the Secretary of Finance, shall request the opinion, in writing,
of the Monetary Board on the monetary implications of the contemplated action. Such opinions must
similarly be requested by all political subdivisions and instrumentalities of the Government before any
credit operation abroad is undertaken by them.

The opinion of the Monetary Board shall be based on the gold and foreign exchange resources and
obligations of the nation and on the effects of the proposed operation on the balance of payments and on
monetary aggregates.

Whenever the Government, or any of its political subdivisions or instrumentalities, contemplates

borrowing within the Philippines, the prior opinion of the Monetary Board shall likewise be requested in
order that the Board may render an opinion on the probable effects of the proposed operation on monetary
aggregates, the price level, and the balance of payments.

Section 124. Representation on the National Economic and Development Authority. - In order to
assure effective coordination between the economic, financial and fiscal policies of the Government and
the monetary, credit and exchange policies of the Bangko Sentral, the Deputy Governor designated by the
Governor of the Bangko Sentral shall be an ex officio member of the National Economic and
Development Authority Board.

CHAPTER VI PRIVILEGES AND PROHIBITIONS

238
 ARTICLE I
PRIVILEGES

Section 125. Tax Exemptions. - The Bangko Sentral shall be exempt for a period of five (5) years
from the approval of this Act from all national, provincial, municipal and city taxes, fees, charges and
assessments.

The exemption authorized in the preceding paragraph of this section shall apply to all property of
the Bangko Sentral, to the resources, receipts, expenditures, profits and income of the Bangko Sentral, as
well as to all contracts, deeds, documents and transactions related to the conduct of the business of the
Bangko Sentral: Provided, however, That said exemptions shall apply only to such taxes, fees, charges
and assessments for which the Bangko Sentral itself would otherwise be liable, and shall not apply to
taxes, fees, charges, or assessments payable by persons or other entities doing business with the Bangko
Sentral: Provided, further, That foreign loans and other obligations of the Bangko Sentral shall be exempt,
both as to principal and interest, from any and all taxes if the payment of such taxes has been assumed by
the Bangko Sentral.

Section 126. Exemption from Customs Duties. - The provision of any general or special law to the
contrary notwithstanding, the importation and exportation by the Bangko Sentral of notes and coins, and
of gold and other metals to be used for purposes authorized under this Act, and the importation of all
equipment needed for bank note production, minting of coins, metal refining and other security printing
operations shall be fully exempt from all customs duties and consular fees and from all other taxes,
assessments and charges related to such importation or exportation.

Section 127. Applicability of the Civil Service Law. - Appointments in the Bangko Sentral, except
as to those which are policy-determining, primarily confidential or highly technical in nature, shall be
made only according to the Civil Service Law and regulations: Provided, That no qualification
requirements for positions in the Bangko Sentral shall be imposed other than those set by the Monetary
Board: Provided, further, That, the Monetary Board or Governor, in accordance with Sections 15(c) and
17(d) of this Act, respectively, may without need of obtaining prior approval from any other government
agency, appoint personnel in the Bangko Sentral whose services are deemed necessary in order not to
unduly disrupt the operations of the Bangko Sentral.

Officers and employees of the Bangko Sentral, including all members of the Monetary Board,
shall not engage directly or indirectly in partisan activities or take part in any election except to vote.

ARTICLE II
PROHIBITIONS

Section 128. Prohibitions. - The Bangko Sentral shall not acquire shares of any kind or accept
them as collateral, and shall not participate in the ownership or management of any enterprise, either
directly or indirectly.

The Bangko Sentral shall not engage in development banking or financing: Provided, however,
That outstanding loans obtained or extended for development financing shall not be affected by the
prohibition of this section.

CHAPTER VII TRANSITORY PROVISIONS

239
 Section 129. Phase-out of Fiscal Agency Functions. - Unless circumstances warrant otherwise and
approved by the Congress Oversight Committee, the Bangko Sentral shall, within a period of three (3)
years but in no case longer than five (5) years from the approval of this Act, phase out all fiscal agency
functions provided for in Sections 117, 118, 119, and 120 as well as in other pertinent provisions of this
Act and transfer the same to the Department of Finance.

Section 130. Phase-out of Regulatory Powers Over the Operations of Finance Corporations and
Other Institutions Performing Similar Functions. - The Bangko Sentral shall, within a period of five (5)
years from the effectivity of this Act, phase out its regulatory powers over finance companies without
quasi-banking functions and other institutions performing similar functions as provided in existing laws,
the same to be assumed by the Securities and Exchange Commission.

Section 131. Implementing Details. - The Bangko Sentral shall be made operational by the
performance of the following acts:

(a) the President shall constitute the Monetary Board by appointing the members thereof within
sixty (60) days from the effectivity of this Act; and

(b) the transfer of such assets and liabilities from the Central Bank to the Bangko Sentral as
provided in Section 132 shall be completed within ninety (90) days from the constitution of the
Monetary Board.

All incumbent personnel in the Central Bank as of the date of the approval of this Act shall
continue to exercise their duties and functions as personnel of the Bangko Sentral subject to the
provisions of Section 133: Provided, That such personnel in the Central Bank as may be necessary for the
purpose of implementing Section 132 may be assigned by the Bangko Sentral Monetary Board to the
Central Bank.

Section 132. Transfer of Assets and Liabilities. - Upon the effectivity of this Act, three (3)
members of the Monetary Board, which may include the Governor, in representation of the Bangko
Sentral, the Secretary of Finance and the Secretary of Budget and Management in representation of the
National Government, and the Chairmen of the Committees on Banks of the Senate and the House of
Representatives shall determine the assets and liabilities of the Central Bank which may be transferred to
or assumed by the Bangko Sentral. The Committee shall complete its work within ninety (90) days from
the constitution of the Monetary Board submitting a comprehensive report with all its findings and
justification.

The following guidelines shall be strictly observed in the determination of which assets and
liabilities shall be transferred to the Bangko Sentral:

(a) the Monetary Board and the Secretary of Finance shall have primary responsibility for
working out creative monetary and financial solutions to retire the Central Bank liabilities and
losses at the least cost to the Government;

(b) the Bangko Sentral shall remit seventy-five percent (75%) of its net profits to a special deposit
account (sinking fund) until such time as the net liabilities of the Central Bank shall have been
liquidated through generally accepted finance mechanisms such as, but not limited to, write-offs,
set-offs, condonation, collections, reappraisal, revaluation and bond issuance by the National
Government, or to the National Government as dividends;

240
 (c) the assets and liabilities to be transferred shall be limited to an amount that will enable the
Bangko Sentral to perform its responsibilities adequately and operate on a viable basis: Provided,
That the assets shall exceed the liabilities as certified by the Commission on Audit (COA), by an
initial amount of Ten billion pesos (P10,000,000,000);

(d) liabilities to be assumed by the Bangko Sentral shall include liability for notes and coins in
circulation as of the effective date of this Act; and

(e) any asset or liability of the Central Bank not transferred to the Bangko Sentral shall be
retained and administered, disposed of and liquidated by the Central Bank itself which shall
continue to exist as the CB Board of Liquidators only for the purposes provided in this paragraph
but not later than twenty-five (25) years or until such time that liabilities have been liquidated:
Provided, That the Bangko Sentral may financially assist the Central Bank of Liquidators in the
liquidation of CB liabilities: Provided, finally, That upon disposition of said retained assets and
liquidation of said retained liabilities, the Central Bank shall be deemed abolished.

All actions taken by the Bangko Sentral Monetary Board under this section shall be reported to
Congress and the President within thirty (30) days.

Section 133. Mandate to Organize. - The Bangko Sentral shall be organized by the Monetary
Board without being subject to the provisions of Republic Act No. 7430, by adopting if it so desires, an
entirely new staffing pattern on organizational structure to suit the operations of the Bangko Sentral under
this Act. No preferential or priority right shall be given to or enjoyed by any personnel for appointment to
any position in the new staffing pattern, nor shall any personnel be considered as having prior or vested
rights with respect to retention in the Bangko Sentral or in any position which may be created in the new
staffing pattern, even if he should be the incumbent of a similar position prior to organization. The
formulation of the program of organization shall be completed within six (6) months after the effectivity
of this Act, and shall be fully implemented within a period of six (6) months thereafter. Personnel who
may not be retained are deemed separated from the service.

Section 134. Separation Benefits. - Pursuant to Section 15 of this Act, the Monetary Board is
authorized to provide separation incentives, and all those who shall retire or be separated from the service
on account of reorganization under the preceding section shall be entitled to such incentives, which shall
be in addition to all gratuities and benefits to which they may be entitled under existing laws.

Section 135. Repealing Clause. - Except as may be provided for in Section 46 and 132 of this Act,
Republic Act No. 265, as amended, the provisions of any other law, special charters, rule or regulation
issued pursuant to said Republic Act No. 265, as amended, or parts thereof, which may be inconsistent
with the provisions of this Act are hereby repealed. Presidential Decree No. 1792 is likewise repealed.

Section 136. Transfer of Powers. - All powers, duties and functions vested by law in the Central
Bank of the Philippines not inconsistent with the provisions of this Act shall be deemed transferred to the
Bangko Sentral ng Pilipinas. All references to the Central Bank of the Philippines in any law or special
charters shall be deemed to refer to the Bangko Sentral.

Section 137. Separability Clause. - If any provision or section of this Act or the application
thereof to any person or circumstance is held invalid, the other provisions or sections of this Act, and the
application of such provision or section to other persons or circumstances, shall not be affected thereby.

241
 Section 138. Effectivity Clause. - This Act shall take effect fifteen (15) days following its
publication in the Official Gazette or in two (2) national newspapers of general circulation.

Approved: June 14, 1993

242
REPUBLIC ACT No. 1405

AN ACT PROHIBITING DISCLOSURE OF OR INQUIRY INTO, DEPOSITS WITH ANY

BANKING INSTITUTION AND PROVIDING PENALTY THEREFOR.

Section 1. It is hereby declared to be the policy of the Government to give encouragement to the people to
deposit their money in banking institutions and to discourage private hoarding so that the same may be
properly utilized by banks in authorized loans to assist in the economic development of the country.

Section 2. 1 All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined,
inquired or looked into by any person, government official, bureau or office, except upon written
permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the
subject matter of the litigation.

Section 3. It shall be unlawful for any official or employee of a banking institution to disclose to any
person other than those mentioned in Section two hereof any information concerning said deposits.

Section 4. All Acts or parts of Acts, Special Charters, Executive Orders, Rules and Regulations which are
inconsistent with the provisions of this Act are hereby repealed.

Section 5. Any violation of this law will subject offender upon conviction, to an imprisonment of not
more than five years or a fine of not more than twenty thousand pesos or both, in the discretion of the
court.

Section 6. This Act shall take effect upon its approval.

Approved: September 9, 1955

Footnote

1
This Section and Section 3 were both amended by PD No. 1792 issued January 16, 1981, PD
1792 was expressly repealed by Sec 135 of R.A. No. 7653, approved June 14, 1993. The original
sections 2 and 3 of R.A. No.1405 are hereby reproduced for reference, as follows; "Sec 2 All
deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and
its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be
examined, inquired or looked into by any person, government official, bureau or office, except
upon written per-mission of the depositor, or in cases of impeachment, or upon order of a
competent court in cases of bribery or dereliction of duty of public officials. or in cases where the
money deposited or invested is the subject matter of the litigation," "Sec. 3. It shall be unlawful
for any official or employee of a banking institution to disclose to any person other than those
mentioned in Section two hereof any information concerning said deposits."

243
REPUBLIC ACT NO. 8791 May 23, 2000

AN ACT PROVIDING FOR THE REGULATION OF THE ORGANIZATION AND

OPERATIONS OF BANKS, QUASI-BANKS, TRUST ENTITIES AND FOR OTHER PURPOSES

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)

Section 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. (n)

Section 3. Definition and Classification of Banks. -

3.1. "Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits. (2a)

3.2. Banks shall be classified into:

(a) Universal banks;

(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) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act");

(e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the "Cooperative Code");

(f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the "Charter of Al
Amanah Islamic Investment Bank of the Philippines"; and

(g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng
Pilipinas. (6-Aa)

CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL

Section 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

244
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;

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 Inquiring into the solvency and liquidity of the institution (2-D); or

4.6 Enforcing prompt corrective action. (n)

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. (2-Ca)

For the purposes of this Act, "quasi-banks" 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. (2-Da)

Section 5. Policy Direction; Ratios, Ceilings and Limitations. - The Bangko Sentral shall provide policy
direction in the areas of money, banking and credit. (n)

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 quasi-banks 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. (2-Ca)

Section 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.

245
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. (4a)

Section 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 or controlled by the bank. (2-
Ba)

CHAPTER III
ORGANIZATION, MANAGEMENT AND ADMINISTRATION OF BANKS. QUASI-BANKS
AND TRUST ENTITIES

Section 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 (7);

8.2 That its funds are obtained from the public, which shall mean twenty (20) or more persons (2-Da); and

8.3 That the minimum capital requirements prescribed by the Monetary Board for each category of banks
are satisfied. (n)

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.

Section 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.

Section 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. (24a)

Section 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 non-bank corporations. (12a; 12-Aa) 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

246
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. (n)

Section 12. Stockholdings of Family Groups of Related Interests. - Stockholdings of individuals related to
each other within the fourth degree of consanguinity or affinity, legitimate or common-law, shall be
considered family groups or related interests and must be fully disclosed in all transactions by such
corporations or related groups of persons with the bank. (12-Ba)

Section 13. Corporate Stockholdings. - Two or more corporations owned or controlled by the same
family group or same group of persons shall be considered related interests and must be fully disclosed in
all transactions by such corporations or related group of persons with the bank. (12-Ba)

Section 14. Certificate of Authority to Register. - The Securities and Exchange Commission shall no
register the articles of incorporation of any bank, or any amendment thereto, unless accompanied by a
certificate of authority issued by the Monetary Board, under it seal. Such certificate shall not be issued
unless the Monetary Board is satisfied from the evidence submitted to it:

14.1 That all requirements of existing laws and regulations to engage in the business for which the
applicant is proposed to be incorporated have been complied with;

14.2 That the public interest and economic conditions, both general and local, justify the authorization;
and

14.3 That the amount of capital, the financing, organization, direction and administration, as well as the
integrity and responsibility of the organizers and administrators reasonably assure the safety of deposits
and the public interest. (9)

The Securities and Exchange Commission shall not register the by-laws of any bank, or any amendment
thereto, unless accompanied by a certificate of authority from the Bangko Sentral. (10)

Section 15. Board of Directors. - The provisions of the Corporation Code to the contrary
notwithstanding, there shall be at least five (5), and a maximum of fifteen (15) members of the board or
directors of a bank, two (2) of whom shall be independent directors. An "independent director" shall mean
a person other than an officer or employee of the bank, its subsidiaries or affiliates or related interests. (n)
Non-Filipino citizens may become members of the board of directors of a bank to the extent of the foreign
participation in the equity of said bank. (Sec. 7, RA 7721) The meetings of the board of directors may be
conducted through modern technologies such as, but not limited to, teleconferencing and video-
conferencing. (n)

Section 16. Fit and Proper Rule. - To maintain the quality of bank management and afford better
protection to depositors and the public in general the Monetary Board shall prescribe, pass upon and
review the qualifications and disqualifications of individuals elected or appointed bank directors or
officers and disqualify those found unfit. After due notice to the board of directors of the bank, the
Monetary Board may disqualify, suspend or remove any bank director or officer who commits or omits an
act which render him unfit for the position. In determining whether an individual is fit and proper to hold
the position of a director or officer of a bank, regard shall be given to his integrity, experience, education,
training, and competence. (9-Aa)

Section 17. Directors of Merged or Consolidated Banks. - In the case of a bank merger or consolidation,
the number of directors shall not exceed twenty-one (21). (l3a)

247
Section 18. Compensation and Other Benefits of Directors and Officers. To protect the finds of
depositors and creditors the Monetary Board may regulate the payment by the bark to its directors and
officers of compensation, allowance, fees, bonuses, stock options, profit sharing and fringe benefits only
in exceptional cases and when the circumstances warrant, such as but not limited to the following:

18.1. When a bank is under comptrollership or conservatorship; or

18.2. When a bank is found by the Monetary Board to be conducting business in an unsafe or unsound
manner; or

18.3. When a bank is found by the Monetary Board to be in an unsatisfactory financial condition. (n)

Section 19. Prohibition on Public Officials. - Except as otherwise provided in the Rural Banks Act, no
appointive or elective public official whether full-time or part-time shall at the same time serve as officer
of any private bank, save in cases where such service is incident to financial assistance provided by the
government or a government owned or controlled corporation to the bank or unless otherwise provided
under existing laws. (13)

Section 20. Bank Branches. - Universal or commercial banks may open branches or other offices within
or outside the Philippines upon prior approval of the Bangko Sentral. Branching by all other banks shall
be governed by pertinent laws.

A bank may, subject to prior approval of the Monetary Board, use any or all of its branches as outlets for
the presentation and/or sale of the financial products of its allied undertaking or of its investment house
units. A bank authorized to establish branches or other offices shall be responsible for all business
conducted in such branches and offices to the same extent and in the same manner as though such
business had all been conducted in the head office. A bank and its branches and offices shall be treated as
one unit. (6-B; 27)

Section 21. Banking Days and Hours. - Unless otherwise authorized by the Bangko Sentral in the interest
of the banking public, all banks including their branches and offices shall transact business on all working
days for at least six (6) hours a day. In addition, banks or any of their branches or offices may open for
business on Saturdays, Sundays or holidays for at least three (3) hours a day: Provided, That banks which
opt to open on days other than working days shall report to the Bangko Sentral the additional days during
which they or their branches or offices shall transact business. For purposes of this Section, working days
shall mean Mondays to Fridays, except if such days are holidays. (6-Ca)

Section 22. Strikes and Lockouts. - The banking industry is hereby declared as indispensable to the
national interest and, notwithstanding the provisions of any law to the contrary, any strike or lockout
involving banks, if unsettled after seven (7) calendar days shall be reported by the Bangko Sentral to the
secretary of Labor who may assume jurisdiction over the dispute or decide it or certify the sane to the
National Labor Relations Commission for compulsory arbitration. However, the President of the
Philippines may at any time intervene and assume jurisdiction over such labor dispute in order to settle or
terminate the same. (6-E)

CHAPTER IV
DEPOSITS. LOANS AND OTHER OPERATIONS

Article I
Operations Of Universal Banks

248
Section 23. Powers of a Universal Bank - A universal bank shall have the authority to exercise, in
addition to the powers authorized for a commercial bank in Section 29, the powers of an investment house
as provided in existing laws and the power to invest in non-allied enterprises as provided in this Act. (21-
B)

Section 24. Equity Investments of a Universal Bank. - A universal bank may, subject to the conditions
stated in the succeeding paragraph, invest in the equities of allied and non-allied enterprises as may be
determined by the Monetary Board. Allied enterprises may either be financial or non-financial. Except as
the Monetary Board may otherwise prescribe:

24.1. The total investment in equities of allied and non-allied enterprises shall not exceed fifty percent
(50%) of the net worth of the bank; and

24.2. The equity investment in any one enterprise, whether allied or non-allied, shall not exceed twenty-
five percent (25%) of the net worth of the bank.

As used in this Act, "net worth" shall mean the total of the unimpaired paid-in capital including paid-in
surplus, retained earnings and undivided profit, net of valuation reserves and other adjustments as may be
required by the Bangko Sentral.

The acquisition of such equity or equities is subject to the prior approval of the Monetary Board which
shall promulgate appropriate guidelines to govern such investments. (21-Ba)

Section 25. Equity Investments of a Universal Bank in Financial Allied Enterprises. - A universal bank
can own up to one hundred percent (100%) of the equity in a thrift bank, a rural bank or a financial allied
enterprise. A publicly-listed universal or commercial bank may own up to one hundred percent (100%) of
the voting stock of only one other universal or commercial bank. (21-B; 21-Ca)

Section 26. Equity Investments of a Universal Bank in Non-Financial Allied Enterprises. - A universal
bank may own up to one hundred percent (100%) of the equity in a non-financial allied enterprise. (21-
Ba)

Section 27. Equity Investments of a Universal Bank in Non-Allied Enterprises. - The equity investment of
a universal bank, or of its wholly or majority-owned subsidiaries, in a single non-allied enterprise shall
not exceed thirty-five percent (35%) of the total equity in that enterprise nor shall it exceed thirty-five
percent (35%) of the voting stock in that enterprise. (21-B)

Section 28. Equity Investments in Quasi-Banks. - To promote competitive conditions in financial markets,
the Monetary Board may further limit to forty percent (40%) equity investments of universal banks in
quasi-banks. This rule shall also apply in the case of commercial banks. (12-E) Article II. Operations Of
Commercial Banks

Section 29. Powers of a Commercial Bank. - A commercial bank shall have, in addition to the general
powers incident to corporations, all such powers as may be necessary to carry on the business of
commercial banking such as accepting drafts and issuing letters of credit; discounting and negotiating
promissory notes, drafts, bills of exchange, and other evidences of debt; accepting or creating demand
deposits; receiving other types of deposits and deposit substitutes; buying and selling foreign exchange
and gold or silver bullion; acquiring marketable bonds and other debt securities; and extending credit,
subject to such rules as the Monetary Board may promulgate. These rules may include the determination

249
of bonds and other debt securities eligible for investment, the maturities and aggregate amount of such
investment.

Section 30. Equity Investments of a Commercial Bank. - A commercial bank may, subject to the
conditions stated in the succeeding paragraphs, invest only in the equities of allied enterprises as may be
determined by the Monetary Board. Allied enterprises may either be financial or non-financial. Except as
the Monetary Board may otherwise prescribe:

30.1. The total investment in equities of allied enterprises shall not exceed thirty-five percent (35%) of the
net worth of the bark; and

30.2. The equity investment in any one enterprise shall not exceed twenty-five percent (25%) of tile net
worth of the bank. The acquisition of such equity or equities is subject to the prior approval of the
Monetary Board which shall promulgate appropriate guidelines to govern such investment.(2lA-a; 21-Ca)

Section 31. Equity Investments of a Commercial Bank in Financial Allied Enterprises. - A commercial
bank may own up to one hundred percent (100%) of the equity of a thrift bank or a rural bank. Where the
equity investment of a commercial bank is in other financial allied enterprises, including another
commercial bank, such investment shall remain a minority holding in that enterprise. (21-Aa; 21-Ca)

Section 32. Equity Investments of a Commercial Bank in Non-Financial Allied Enterprises. A

commercial bank may own up to one hundred percent (100%) of the equity in a non-financial allied
enterprise. (21-Aa) Article III. Provisions Applicable To All Banks, Quasi-Banks, And Trust Entities

Section 33. Acceptance of Demand Deposits. - A bank other than a universal or commercial bank cannot
accept or create demand deposits except upon prior approval of, and subject to such conditions and rules
as may be prescribed by the Monetary Board. (72-Aa)

Section 34. Risk-Based Capital. - The Monetary Board shall prescribe the minimum ratio which the net
worth of a bank must bear to its total risk assets which may include contingent accounts. For purposes of
this Section, the Monetary Board may require such ratio be determined on the basis of the net worth and
risk assets of a bank and its subsidiaries, financial or otherwise, as well as prescribe the composition and
the manner of determining the net worth and total risk assets of banks and their subsidiaries: Provided,
That in the exercise of this authority, the Monetary Board shall, to the extent feasible conform to
internationally accepted standards, including those of the Bank for International Settlements(BIS),
relating to risk-based capital requirements: Provided further, That it may alter or suspend compliance with
such ratio whenever necessary for a maximum period of one (1) year: Provided, finally, That such ratio
shall be applied uniformly to banks of the same category. In case a bank does not comply with the
prescribed minimum ratio, the Monetary Board may limit or prohibit the distribution of net profits by
such bank and may require that part or all of the net profits be used to increase the capital accounts of the
bank until the minimum requirement has been met The Monetary Board may, furthermore, restrict or
prohibit the acquisition of major assets and the making of new investments by the bank, with the
exception of purchases of readily marketable evidences of indebtedness of the Republic of the Philippines
and of the Bangko Sentral and any other evidences of indebtedness or obligations the servicing and
repayment of which are fully guaranteed by the Republic of the Philippines, until the minimum required
capital ratio has been restored. In case of a bank merger or consolidation, or when a bank is under
rehabilitation under a program approved by the Bangko Sentral, Monetary Board may temporarily relieve
the surviving bank, consolidated bank, or constituent bank or corporations under rehabilitation from full
compliance with the required capital ratio under such conditions as it may prescribe. Before the effectivity
of rules which the Monetary Board is authorized to prescribe under this provision, Section 22 of the

250
General Banking Act, as amended, Section 9 of the Thrift Banks Act, and all pertinent rules issued
pursuant thereto, shall continue to be in force. (22a)

Section 35. Limit on Loans, Credit Accommodations and Guarantees

35.1 Except as the Monetary Board may otherwise prescribe for reasons of national interest, the total
amount of loans, credit accommodations and guarantees as may be defined by the Monetary Board that
may be extended by a bank to any person, partnership, association, corporation or other entity shall at no
time exceed twenty percent (20%) of the net worth of such bank. The basis for determining compliance
with single borrower limit is the total credit commitment of the bank to the borrower.

35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans, credit accommodations
and guarantees prescribed in the preceding paragraph may be increased by an additional ten percent
(10%) of the net worth of such bank provided the additional liabilities of any borrower are adequately
secured by trust receipts, shipping documents, warehouse receipts or other similar documents transferring
or securing title covering readily marketable, non-perishable goods which must be fully covered by
insurance.

35.3 The above prescribed ceilings shall include (a) the direct liability of the maker or acceptor of paper
discounted with or sold to such bank and the liability of a general endorser, drawer or guarantor who
obtains a loan or other credit accommodation from or discounts paper with or sells papers to such bank;
(b) in the case of an individual who owns or controls a majority interest in a corporation, partnership,
association or any other entity, the liabilities of said entities to such bank; (c) in the case of a corporation,
all liabilities to such bank of all subsidiaries in which such corporation owns or controls a majority
interest; and (d) in the case of a partnership, association or other entity, the liabilities of the members
thereof to such bank.

35.4. Even if a parent corporation, partnership, association, entity or an individual who owns or controls a
majority interest in such entities has no liability to the bank, the Monetary Board may prescribe the
combination of the liabilities of subsidiary corporations or members of the partnership, association, entity
or such individual under certain circumstances, including but not limited to any of the following
situations: (a) the parent corporation, partnership, association, entity or individual guarantees the
repayment of the liabilities; (b) the liabilities were incurred for the accommodation of the parent
corporation or another subsidiary or of the partnership or association or entity or such individual; or (c)
the subsidiaries though separate entities operate merely as departments or divisions of a single entity.

35.5. For purposes of this Section, loans, other credit accommodations and guarantees shall exclude: (a)
loans and other credit accommodations secured by obligations of the Bangko Sentral or of the Philippine
Government: (b) loans and other credit accommodations fully guaranteed by the government as to the
payment of principal and interest; (c) loans and other credit accommodations covered by assignment of
deposits maintained in the lending bank and held in the Philippines; (d) loans, credit accommodations and
acceptances under letters of credit to the extent covered by margin deposits; and (e) other loans or credit
accommodations which the Monetary Board may from time to time, specify as non-risk items.

35.6. Loans and other credit accommodations, deposits maintained with, and usual guarantees by a bank
to any other bank or non-bank entity, whether locally or abroad, shall be subject to the limits as herein
prescribed.

35.7. Certain types of contingent accounts of borrowers may be included among those subject to these
prescribed limits as may be determined by the Monetary Board.(23a)

251
Section 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related
Interests. - No director or officer of any bank shall, directly or indirectly, for himself or as the
representative or agent of others, borrow from such bank nor shall he become a guarantor, endorser or
surety for loans from such bank to others, or in any manner be an obligor or incur any contractual liability
to the bank except with the written approval of the majority of all the directors of the bank, excluding the
director concerned: Provided, That such written approval shall not be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit plan approved by the Bangko
Sentral. The required approval shall be entered upon the records of the bank and a copy of such entry
shall be transmitted forthwith to the appropriate supervising and examining department of the Bangko
Sentral. Dealings of a bank with any of its directors, officers or stockholders and their related interests
shall be upon terms not less favorable to the bank than those offered to others. After due notice to the
board of directors of the bank, the office of any bank director or officer who violates the provisions of this
Section may be declared vacant and the director or officer shall be subject to the penal provisions of the
New Central Bank Act. The Monetary Board may regulate the amount of loans, credit accommodations
and guarantees that may be extended, directly or indirectly, by a bank to its directors, officers,
stockholders and their related interests, as well as investments of such bank in enterprises owned or
controlled by said directors, officers, stockholders and their related interests. However, the outstanding
loans, credit accommodations and guarantees which a bank may extend to each of its stockholders,
directors, or officers and their related interests, shall be limited to an amount equivalent to their respective
unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided,
however, That loans, credit accommodations and guarantees secured by assets considered as non-risk by
the Monetary Board shall be excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits granted in accordance with rules
as may be prescribed by the Monetary Board shall not be subject to the individual limit. The Monetary
Board shall define the term "related interests." The limit on loans, credit accommodations and guarantees
prescribed herein shall not apply to loans, credit accommodations and guarantees extended by a
cooperative bank to its cooperative shareholders. (83a)

Section 37. Loans and Other Credit Accommodations Against Real Estate. - Except as the Monetary
Board may otherwise prescribe, loans and other credit accommodations against real estate shall not
exceed seventy-five percent (75%) of the appraised value of the respective real estate security, plus sixty
percent (60%) of the appraised value of the insured improvements, and such loans may be made to the
owner of the real estate or to his assignees. (78a)

Section 38. Loans And Other Credit Accommodations on Security of Chattels and Intangible Properties. -
Except as the Monetary Board may otherwise prescribe, loans and other credit accommodations on
security of chattels and intangible properties such as, but not limited to, patents, trademarks, trade names,
and copyrights shall not exceed seventy-five percent (75%) of the appraised value of the security, an such
loans and other credit accommodation may be made to the title-holder of the chattels and intangible
properties or his assignees. (78a)

Section 39. Grant and Purpose of Loans and Other Credit Accommodations. - A bank shall grant loans
and other credit accommodations only in amounts and for the periods of time essential for the effective
completion of the operations to be financed. Such grant of loans and other credit accommodations shall be
consistent with safe and sound banking practices. (75a) The purpose of all loans and other credit
accommodations shall be stated in the application and in the contract between the bank and the borrower.
If the bank finds that the proceeds of the loan or other credit accommodation have been employed,
without its approval, for purposes other than those agreed upon with the bank, it shall have the right to
terminate the loan or other credit accommodation and demand immediate repayment of the obligation.
(77)

252
Section 40. Requirement for Grant Of Loans or 0ther Credit Accommodations. - Before granting a loan
or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his
commitments to the bank. Toward this end, a bank may demand from its credit applicants a statement of
their assets and liabilities and of their income and expenditures and such information as may be
prescribed by law or by rules and regulations of the Monetary Board to enable the bank to properly
evaluate the credit application which includes the corresponding financial statements submitted for
taxation purposes to the Bureau of Internal Revenue. Should such statements prove to be false or incorrect
in any material detail, the bank may terminate any loan or other credit accommodation granted on the
basis of said statements and shall have the right to demand immediate repayment or liquidation of the
obligation. In formulating rules and regulations under this Section, the Monetary Board shall recognize
the peculiar characteristics of micro financing, such as cash flow-based lending to the basic sectors that
are not covered by traditional collateral. (76a)

Section 41. Unsecured Loans or Other Credit Accommodations. - The Monetary Board is hereby
authorized to issue such regulations as it may deem necessary with respect to unsecured loans or other
credit accommodations that may be granted by banks. (n)

Section 42. Other Security Requirements for Bank Credits. - The Monetary Board may, by regulation,
prescribe further security requirements to which the various types of bank credits shall be subject, and, in
accordance with the authority granted to it in Section 106 of the New Central Bank Act, the Board may by
regulation, reduce the maximum ratios established in Sections 36 and 37 of this Act, or, in special cases,
increase the maximum ratios established therein. (78)

Section 43. Authority to Prescribe Terms and Conditions of Loans and Other Credit Accommodations. -
The Monetary Board, may, similarly in accordance with the authority granted to it in Section 106 of the
New Central Bank Act, and taking into account the requirements of the economy for the effective
utilization of long-term funds, prescribe the maturities, as well as related terms and conditions for various
types of bank loans and other credit accommodations. Any change by the Board in the maximum
maturities, as well as related terms and conditions for various types of bank loans and other credit
accommodations. Any change by the Board in the maximum maturities shall apply only to loans and
other credit accommodations made after the date of such action. The Monetary Board shall regulate the
interest imposed on micro finance borrowers by lending investors and similar lenders such as, but not
limited to, the unconscionable rates of interest collected on salary loans and similar credit
accommodations. (78a)

Section 44. Amortization on Loans and Other Credit Accommodations. - The amortization schedule of
bank loans and other credit accommodations shall be adapted to the nature of the operations to be
financed. In case of loans and other credit accommodations with maturities of more than five (5) years,
provisions must be made for periodic amortization payments, but such payments must be made at least
annually: Provided, however, That when the borrowed funds are to be used for purposes which do not
initially produce revenues adequate for regular amortization payments therefrom, the bank may permit the
initial amortization payment to be deferred until such time as said revenues are sufficient for such
purpose, but in no case shall the initial amortization date be later than five (5) years from the date on
which the loan or other credit accommodation is granted. (79a) In case of loans and other credit
accommodations to micro finance sectors, the schedule of loan amortization shall take into consideration
the projected cash flow of the borrower and adopt this into the terms and conditions formulated by banks.
(n)

Section 45. Prepayment of Loans and Other Credit Accommodations. - A borrower may at any time prior
to the agreed maturity date prepay, in whole or in part, the unpaid balance of any bank loan and other

253
credit accommodation, subject to such reasonable terms and conditions as may be agreed upon between
the bank and its borrower. (80a)

Section 46. Development Assistance Incentives. - The Bangko Sentral shall provide incentives to banks
which, without government guarantee, extend loans to finance educational institutions cooperatives,
hospitals and other medical services, socialized or low-cost housing, local government units and other
activities with social content. (n)

Section 47. Foreclosure of Real Estate Mortgage. - In the event of foreclosure, whether judicially or
extra-judicially, of any mortgage on real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property has been sold for the full or partial
payment of his obligation shall have the right within one year after the sale of the real estate, to redeem
the property by paying the amount due under the mortgage deed, with interest thereon at rate specified in
the mortgage, and all the costs and expenses incurred by the bank or institution from the sale and custody
of said property less the income derived therefrom. However, the purchaser at the auction sale concerned
whether in a judicial or extra-judicial foreclosure shall have the right to enter upon and take possession of
such property immediately after the date of the confirmation of the auction sale and administer the same
in accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings
instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a
bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may
suffer by the enjoining or the restraint of the foreclosure proceeding. Notwithstanding Act 3135, juridical
persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to
redeem the property in accordance with this provision until, but not after, the registration of the certificate
of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3)
months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale
prior to the effectivity of this Act shall retain their redemption rights until their expiration. (78a)

Section 48. Renewal or Extension of Loans and Other Credit Accommodations. - The Monetary Board
may, by regulation, prescribe the conditions and limitations under which a bank may grant extensions or
renewals of its loans and other credit accommodations. (81)

Section 49. Provisions for Losses and Write-Offs. - All debts due to any bank on which interest is past
due and unpaid for such period as may be determined by the Monetary Board, unless the same are welt-
secured and in the process of collection shall be considered bad debts within the meaning of this Section.
The Monetary Board may fix, by regulation or by order in a specific case, the amount of reserves for bad
debts or doubtful accounts or other contingencies. Writing off of loans, other credit accommodations,
advances and other assets shall be subject to regulations issued by the Monetary Board. (84a)

Section 50. Major Investments. - For the purpose or enhancing bank supervision, the Monetary Board
shall establish criteria for reviewing major acquisitions of investments by a bank including corporate
affiliations or structures that may expose the bank to undue risks or in any way hinder effective
supervision.

Section 51. Ceiling on Investments in Certain Assets. - Any bank may acquire real estate as shall be
necessary for its own use in the conduct of its business: Provided, however, That the total investment in
such real estate and improvements thereof including bank equipment, shall not exceed fifty percent (50%)
of combined capital accounts: Provided, further, That the equity investment of a bank in another
corporation engaged primarily in real estate shall be considered as part of the bank's total investment in
real estate, unless otherwise provided by the Monetary Board. (25a)

254
Section 52. Acquisition of Real Estate by Way of Satisfaction of Claims. - Notwithstanding the limitations
of the preceding Section, a bank may acquire, hold or convey real property under the following
circumstances:

52.1. Such as shall be mortgaged to it in good faith by way of security for debts;

52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its
dealings, or

52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and
such as it shall purchase to secure debts due it.

Any real property acquired or held under the circumstances enumerated in the above paragraph shall be
disposed of by the bank within a period of five (5) years or as may be prescribed by the Monetary Board:
Provided, however, That the bank may, after said period, continue to hold the property for its own use,
subject to the limitations of the preceding Section. (25a)

Section 53. Other Banking Services. - In addition to the operations specifically authorized in this Act, a
bank may perform the following services:

53.1. Receive in custody funds, documents and valuable objects;

53.2. Act as financial agent and buy and sell, by order of and for the account of their customers, shares,
evidences of indebtedness and all types of securities;

53.3. Make collections and payments for the account of others and perform such other services for their
customers as are not incompatible with banking business;

53.4 Upon prior approval of the Monetary Board, act as managing agent, adviser, consultant or
administrator of investment management/advisory/consultancy accounts; and

53.5. Rent out safety deposit boxes.

The bank shall perform the services permitted under Subsections 53.1, 53.2,53.3 and 53.4 as depositary or
as an agent. Accordingly, it shall keep the funds, securities and other effects which it receives duly
separate from the bank's own assets and liabilities: The Monetary Board may regulate the operations
authorized by this Section in order to ensure that such operations do not endanger the interests of the
depositors and other creditors of the bank. In case a bank or quasi-bark notifies the Bangko Sentral or
publicly announces a bank holiday, or in any manner suspends the payment of its deposit liabilities
continuously for more than thirty (30) days, the Monetary Board may summarily and without need for
prior hearing close such banking institution and place it under receivership of the Philippine Deposit
Insurance Corporation. (72a)

Section 54. Prohibition to Act as Insurer. - A bank shall not directly engage in insurance business as the
insurer. (73)

Section 55. Prohibited Transactions.

55.1. No director, officer, employee, or agent of any bank shall -

255
 (a) Make false entries in any bank report or statement or participate in any fraudulent transaction,
thereby affecting the financial interest of, or causing damage to, the bank or any person;

(b) Without order of a court of competent jurisdiction, disclose to any unauthorized person any
information relative to the funds or properties in the custody of the bank belonging to private
individuals, corporations, or any other entity: Provided, That with respect to bank deposits, the
provisions of existing laws shall prevail;

(c) Accept gifts, fees, or commissions or any other form of remuneration in connection with the
approval of a loan or other credit accommodation from said bank;

(d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the
actions of the bank or any bank; or

(e) Outsource inherent banking functions.

55.2. No borrower of a bank shall -

(a) Fraudulently overvalue property offered as security for a loan or other credit accommodation
from the bank;

(b) Furnish false or make misrepresentation or suppression of material facts for the purpose of
obtaining, renewing, or increasing a loan or other credit accommodation or extending the period
thereof;

(c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit
accommodation; or

(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any
other form of compensation in order to influence such persons into approving a loan or other
credit accommodation application.

55.3 No examiner, officer or employee of the Bangko Sentral or of any department, bureau, office, branch
or agency of the Government that is assigned to supervise, examine, assist or render technical assistance
to any bank shall commit any of the acts enumerated in this Section or aid in the commission of the same.
(87-Aa)

The making of false reports or misrepresentation or suppression of material facts by personnel of the
Bangko Sental ng Pilipinas shall be subject to the administrative and criminal sanctions provided under
the New Central Bank Act.

55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known as the Banks Secrecy
Law, no bank shall employ casual or non regular personnel or too lengthy probationary personnel in the
conduct of its business involving bank deposits.

Section 56. Conducting Business in an Unsafe or Unsound Manner - In determining whether a particular
act or omission, which is not otherwise prohibited by any law, rule or regulation affecting banks, quasi-
banks or trust entities, may be deemed as conducting business in an unsafe or unsound manner for
purposes of this Section, the Monetary Board shall consider any of the following circumstances:

256
56.1 The act or omission has resulted or may result in material loss or damage, or abnormal risk or danger
to the safety, stability, liquidity or solvency of the institution;

56.2 The act or omission has resulted or may result in material loss or damage or abnormal risk to the
institution's depositors, creditors, investors, stockholders or to the Bangko Sentral or to the public in
general;

56.3 The act or omission has caused any undue injury, or has given any unwarranted benefits, advantage
or preference to the bank or any party in the discharge by the director or officer of his duties and
responsibilities through manifest partiality, evident bad faith or gross inexcusable negligence; or

56.4 The act or omission involves entering into any contract or transaction manifestly and grossly
disadvantageous to the bank, quasi-bank or trust entity, whether or not the director or officer profited or
will profit thereby.

Whenever a bank, quasi-bank or trust entity persists in conducting its business in an unsafe or unsound
manner, the Monetary Board may, without prejudice to the administrative sanctions provided in Section
37 of the New Central Bank Act, take action under Section 30 of the same Act and/or immediately
exclude the erring bank from clearing, the provisions of law to the contrary notwithstanding. (n)

Section 57. Prohibition on Dividend Declaration. - No bank or quasi-bank shall declare dividends, if at
the time of declaration:

57.1 Its clearing account with the Bangko Sentral is overdrawn; or

57.2 It is deficient in the required liquidity floor for government deposits for five (5) or more consecutive
days, or

57.3 It does not comply with the liquidity standards/ratios prescribed by the Bangko Sentral for purposes
of determining funds available for dividend declaration; or

57.4 It has committed a major violation as may be determined by the Bangko Sentral (84a)

Section 58. Independent Auditor. - The Monetary Board may require a bank, quasi-bank or trust entity to
engage the services of an independent auditor to be chosen by the bank, quasi-bank or trust entity
concerned from a list of certified public accountants acceptable to the Monetary Board. The term of the
engagement shall be as prescribed by the Monetary Board which may either be on a continuing basis
where the auditor shall act as resident examiner, or on the basis of special engagements; but in any case,
the independent auditor shall be responsible to the bank's, quasi-bank's or trust entity's board of directors.
A copy of the report shall be furnished to the Monetary Board. The Monetary Board may also direct the
board of directors of a bank, quasi-bank, trusty entity and/or the individual members thereof; to conduct,
either personally or by a committee created by the board, an annual balance sheet audit of the bank, quasi-
bank or trust entity to review the internal audit and control system of the bank, quasi-bank or trust entity
and to submit a report of such audit. (6-Da)

Section 59. Authority to Regulate Electronic Transactions. - The Bangko Sentral shall have full authority
to regulate the use of electronic devices, such as computers, and processes for recording, storing and
transmitting information or data in connection with the operations of a bank; quasi-bank or trust entity,
including the delivery of services and products to customers by such entity. (n)

257
Section 60. Financial Statements. - Every bank, quasi-bank or trust entity shall submit to the appropriate
supervising and examining department of the Bangko Sentral financial statements in such form and
frequency as may be prescribed by the Bangko Sentral. Such statements, which shall be as of a specific
date designated by the Bangko Sentral, shall show thee actual financial condition of the institution
submitting the statement, and of its branches, offices, subsidiaries and affiliates, including the results of
its operations, and shall contain such information as may be required in Bangko Sentral regulations. (n)

Section 61. Publication of Financial Statements. - Every bank, quasi-bank or trust entity, shall publish a
statement of its financial condition, including those of its subsidiaries and affiliates, in such terms
understandable to the layman and in such frequency as may be prescribed Bangko Sentral, in English or
Filipino, at least once every quarter in a newspaper of general circulation in the city or province where the
principal office, in the case of a domestic institution or the principal branch or office in the case of a
foreign bank, is located, but if no newspaper is published in the same province, then in a newspaper
published in Metro Manila or in the nearest city or province. The Bangko Sentral may by regulation
prescribe the newspaper where the statements prescribed herein shall be published. The Monetary Board
may allow the posting of the financial statements of a bank, quasi-bank or trust entity in public places it
may determine, lieu of the publication required in the preceding paragraph, when warranted by the
circumstances. Additionally, banks shall make available to the public in such form and manner as the
Bangko Sentral may prescribe the complete set of its audited financial statements as well as such other
relevant information including those on enterprises majority-owned or controlled by the bank, that will
inform the public of the true financial condition of a bank as of any given time. In periods of national
and/or local emergency or of imminent panic which directly threaten monetary and banking stability, the
Monetary Board, by a vote of at least five (5) of its members, in special cases and upon application of the
bank, quasi-bank or trust entity, may allow such bank, quasi-bank or trust entity to defer for a stated
period of time the publication of the statement of financial condition required herein. (n)

Section 62. Publication of Capital Stock. - A bank, quasi-bank or trust entity incorporated under the laws
of the Philippines shall not publish the amount of its authorized or subscribed capital stock without
indicating at the same time and with equal prominence, the amount of its capital actually paid up. No
branch of any foreign bank doing business in the Philippines shall in any way announce the amount of the
capital and surplus of its head office, or of the bank in its entirety without indicating at the same time and
with equal prominence the amount of the capital, if any, definitely assigned to such branch, such fact shall
be stated in, and shall form part of the publication. (82)

Section 63. Settlement of Disputes. - The provisions of any law to the contrary notwithstanding, the
Bangko Sentral shall be consulted by other government agencies or instrumentalities in actions or
proceedings initiated by or brought before them involving controversies in banks, quasi-banks or trust
entities arising out of and involving relations between and among their directors, officers or stockholders,
as well as disputes between any or all of them and the bank, quasi-bank or trust entity of which they are
directors, officers or stockholders. (n)

Section 64. Unauthorized Advertisement or Business Representation. - No person, association, or

corporation unless duly authorized to engage in the business of a bank, quasi-bank, trust entity, or savings
and loan association as defined in this Act, or other banking laws, shall advertise or hold itself out as
being engaged in the business of such bank, quasi-bank, trust entity, or association, or use in connection
with its business title, the word or words "bank", "banking", "banker", "quasi-bank", "quasi-banking",
"quasi-banker", "savings and loan association", "trust corporation", "trust company" or words of similar
import or transact in any manner the business of any such bank, corporation or association. (6)

258
Section 65. Service Fees. - The Bangko Sentral may charge equitable rates, commissions or fees, as may
be prescribed by the Monetary Board for supervision, examination and other services which it renders
under this Act. (n)

Section 66. Penalty for Violation of this Act. - Unless otherwise herein provided, the violation of any of
the provisions of this Act shall be subject to Sections 34, 35, 36 and 37 of the New Central Bank Act. If
the offender is a director or officer of a bank, quasi-bank or trust entity, the Monetary Board may also
suspend or remove such director or officer. If the violation is committed by a corporation, such
corporation may be dissolved by quo warranto proceedings instituted by the Solicitor General. (87)

CHAPTER V
PLACEMENT UNDER CONSERVATORSHIP

Section 67. Conservatorship. - The grounds and procedures for placing a bank under conservatorship, as
well as, the powers and duties of the conservator appointed for the bank shall be governed by the
provisions of Section 29 and the last two paragraphs of Section 30 of the New Central Bank Act:
Provided, That this Section shall also apply to conservatorship proceedings of quasi-banks. (n)

CHAPTER VI
CESSATION OF BANKING BUSINESS

Section 68. Voluntary Liquidation. - In case of voluntary liquidation of any bank organized under the
laws of the Philippines, or of any branch or office in the Philippines of a foreign bank, written notice of
such liquidation shall be sent to the Monetary Board before such liquidation shall be sent to the Monetary
Board before such liquidation is undertaken, and the Monetary Board shall have the right to intervene and
take such steps as may be necessary to protect the interests of creditors. (86)

Section 69. Receivership and Involuntary Liquidation. - The grounds and procedures for placing a bank
under receivership or liquidation, as well as the powers and duties of the receiver or liquidator appointed
for the bank shall be governed by the provisions of Sections 30, 31, 32, and 33 of the New Central Bank
Act: Provided, That the petitioner or plaintiff files with the clerk or judge of the court in which the action
is pending a bond, executed in favor of the Bangko Sentral, in an amount to be fixed by the court. This
Section shall also apply to the extent possible to the receivership and liquidation proceedings of quasi-
banks. (n)

Section 70. Penalty for Transactions After a Bank Becomes Insolvent. - Any director or officer of any
bank declared insolvent or placed under receivership by the Monetary Board who refuses to turn over the
bank's records and assets to the designated receivers, or who tampers with banks records, or who
appropriates for himself for another party or destroys or causes the misappropriation and destruction of
the bank's assets, or who receives or permits or causes to be received in said bank any deposit, collection
of loans and/or receivables, or who pays out or permits or causes to be transferred any securities or
property of said bank shall be subject to the penal provisions of the New Central Bank Act. (85a)

CHAPTER VII
LAWS GOVERNING OTHER TYPES OF BANKS

Section 71. Other Banking Laws. - The organization, the ownership and capital requirements, powers,
supervision and general conduct of business of thrift banks, rural banks and cooperative banks shall be
governed by the provisions of the Thrift Banks Act, the Rural Banks Act, and the Cooperative Code,
respectively. The organization, ownership and capital requirements, powers, supervision and general

259
conduct of business of Islamic banks shall be governed by special laws. The provisions of this Act,
however, insofar as they are not in conflict with the provisions of the Thrift Banks Act, the Rural Banks
Act, and the Cooperative Code shall likewise apply to thrift banks, rural banks, and cooperative banks,
respectively. However, for purposes of prescribing the minimum ratio which the net worth of a thrift bank
must bear to its total risk assets, the provisions of Section 33 of this Act shall govern. (n)

CHAPTER VIII
FOREIGN BANKS

Section 72. Transacting Business in the Philippines. - The entry of foreign banks in the Philippines
through the establishment of branches shall be governed by the provisions of the Foreign Banks
Liberalization Act. The conduct of offshore banking business in the Philippines shall be governed by the
provisions of the Presidential Decree No. 1034, otherwise known as the "Offshore Banking System
Decree." (14a)

Section 73. Acquisition of Voting Stock in a Domestic Bank. - Within seven (7) years from the effectivity
of this act and subject to guidelines issued pursuant to the Foreign Banks Liberalization Act, the
Monetary Board may authorize a foreign bank to acquire up to one hundred percent (100%) of the voting
stock of only one (1) bank organized under the laws of the Republic of the Philippines. Within the same
period, the Monetary Board may authorize any foreign bank, which prior to the effectivity of this Act
availed itself of the privilege to acquire up to sixty percent (60%) of the voting stock of a bank under the
Foreign Banks Liberalization Act and the Thrift Banks Act, to further acquire voting shares such bank to
the extent necessary for it to own one hundred percent (100%) of the voting stock thereof. In the exercise
of the authority, the Monetary Board shall adopt measures as may be necessary to ensure that at all times
the control of seventy percent (70%) of the resources or assets of the entire banking system is held by
banks which are at least majority-owned by Filipinos. Any right, privilege or incentive granted to a
foreign bank under this Section shall be equally enjoyed by and extended under the same conditions to
banks organized under the laws of the Republic of the Philippines. (Secs. 2 and 3, RA 7721

Section 74. Local Branches of Foreign Banks. - In the case of a foreign bank which has more than one (1)
branch in the Philippines, all such branches shall be treated as one (1) unit for the purpose of this Act, and
all references to the Philippine branches of foreign banks shall be held to refer to such units. (68)

Section 75. Head Office Guarantee. - In order to provide effective protection of the interests of the
depositors and other creditors of Philippine branches of a foreign bank, the head office of such branches
shall fully guarantee the prompt payment of all liabilities of its Philippine branch. (69) Residents and
citizens of the Philippines who are creditors of a branch in the Philippines of a foreign bank shall have
preferential rights to the assets of such branch in accordance with the existing laws. (19)

Section 76. Summons and Legal Process. - Summons and legal process served upon the Philippine agent
or head of any foreign bank designated to accept service thereof shall give jurisdiction to the courts over
such bank, and service of notices on such agent or head shall be as binding upon the bank which he
represents as if made upon the bank itself. Should the authority of such agent or head to accept service of
summons and legal processes for the bank or notice to it be revoked, or should such agent or head become
mentally incompetent or otherwise unable to accept service while exercising such authority, it shall be the
duty of the bank to name and designate promptly another agent or head upon whom service of summons
and processes in legal proceedings against the bank and of notices affecting the bank may be made, and to
file with the Securities and Exchange Commission a duly authenticated nomination of such agent. In the
absence of the agent or head or should there be no person authorized by the bank upon whom service of
summons, processes and all legal notices may be made, service of summons, processes and legal notices

260
may be made upon the Bangko Sentral Deputy Governor In-Charge of the supervising and examining
departments and such service shall be as effective as if made upon the bank or its duly authorized agent or
head. In case of service for the bank upon the Bangko Sentral Deputy Governor In-charge of the
supervising and examining departments, the said deputy Governor shill register and transmit by mail to
the president or the secretary of the bank at its head or principal office a copy, duly certified by him, of
the summons, process, or notice. The sending of such copy of the summons, process, or notice shall be a
necessary part of the services and shall complete the service. The registry receipt of mailing shall be
prima facie evidence of the transmission of the summons, process or notice. All costs necessarily incurred
by the said Deputy Governor for the making and mailing and sending of a copy of the summons, process,
or notice to the president or the secretary of the bank at its head or principal office shall be paid in
advance by the party at whose instance the service is made. (17)

Section 77. Laws Applicable. - In all matters not specifically covered by special provisions applicable
only to a foreign bank or its branches and other offices in the Philippines any foreign bank licensed to do
business in the Philippines shall be bound by the provisions of this Act, all other laws, rules and
regulations applicable to banks organized under the laws of the Philippines of the same class, except those
that provide for the creation, formation, organization or dissolution of corporations or for the fixing of the
relations, liabilities, responsibilities, or duties of stockholders, members, directors or officers of
corporations to each other or to the corporation. (18)

Section 78. Revocation of License of a Foreign Bank - The Monetary Board may revoke the license to
transact business in the Philippines of, any foreign bank, if it finds that the foreign bank is insolvent or in
imminent danger thereof or that its continuance in business will involve probable loss to those transacting
business with it. After the revocation of its license, it shall be unlawful for any such foreign banks to
transact business in the Philippines unless its license is renewed or reissued. After the revocation of such
license, the Bangko Sentral shall take the necessary action to protect the creditors of such foreign bank
and the public. The provisions of the New Central Bank Act on sanctions and penalties shall likewise be
applicable. (16)

CHAPTER IX
TRUST OPERATIONS

Section 79. Authority to Engage in Trust Business. - Only a stock corporation or a person duly authorized
by the Monetary Board to engage in trust business shall act as a trustee or administer any trust or hold
property in trust or on deposit for the use, benefit, or behoof of others. For purposes of this Act, such a
corporation shall be referred to as a trust entity. (56a; 57a)

Section 80. Conduct of Trust Business. - A trust entity shall administer the funds or property under its
custody with the diligence that a prudent man would exercise in the conduct of an enterprise of a like
character and with similar aims. No trust entity shall, for the account of the trustor or the beneficiary of
the trust, purchase or acquire property from, or sell, transfer, assign, or lend money or property to, or
purchase debt instruments of, any of the departments, directors, officers, stockholders, or employees of
the trust entity, relatives within the first degree of consanguinity or affinity, or the related interests, of
such directors, officers and stockholders, unless the transaction is specifically authorized by the trustor
and the relationship of the trustee and the other party involved in the transaction is fully disclosed to the
trustor of beneficiary of the trust prior to the transaction. The Monetary Board shall promulgate such rules
and regulations as may be necessary to prevent circumvention of this prohibition or the evasion of the
responsibility herein imposed on a trust entity. (56)

261
Section 81. Registration of Articles of Incorporation and By-Laws of a Trust Entity. - The Securities and
Exchange Commission shall not register the articles of incorporation and by-laws or any amendment
thereto, of any trust entity, unless accompanied by a certificate of authority issued by the Bangko Sentral.
(n)

Section 82. Minimum Capitalization. - A trust entity, before it can engage in trust or other fiduciary
business, shall comply with the minimum paid-in capital requirement which will be determined by the
Monetary Board. (n)

Section 83. Powers of a Trust Entity. - A trust entity, in addition to the general powers incident to
corporations, shall have the power to:

83.1 Act as trustee on any mortgage or bond issued by any municipality, corporation, or any body politic
and to accept and execute any trust consistent with law;

83.2 Act under the order or appointment of any court as guardian, receiver, trustee, or depositary of the
estate of any minor or other incompetent person, and as receiver and depositary of any moneys paid into
court by parties to any legal proceedings and of property of any kind which may be brought under the
jurisdiction of the court;

83.3. Act as the executor of any will when it is named the executor thereof;

83.4 Act as administrator of the estate of any deceased person, with the will annexed, or as administrator
of the estate of any deceased person when there is no will;

83.5. Accept and execute any trust for the holding, management, and administration of any estate, real or
personal, and the rents, issues and profits thereof; and

83.6. Establish and manage common trust funds, subject to such rules and regulations as may be
prescribed by the Monetary Board.

Section 84. Deposit for the Faithful Performance of Trust Duties. - Before transacting trust business,
every trust entity shall deposit with the Bangko Sentral, as security for the faithful performance of its trust
duties, cash or securities approved by the Monetary Board in an amount equal to or not less than Five
hundred thousand pesos (P500,000.00) or such higher amount as may fixed by the Monetary Board:
Provided, however, That the Monetary Board shall require every trust entity to increase the amount of its
cash or securities on deposit with the Bangko Sentral in accordance with the provisions of this paragraph.
Should the capital and surplus fall below said amount, the Monetary Board shall have the same authority
as that granted to it under the provisions of the fifth paragraph of Section 34 of this Act. A trust entity so
long as it shall continue to be solvent and comply with laws or regulations shall have the right to collect
the interest earned on such securities deposited with the Bangko Sentral and, from time to time, with the
approval of the Bangko Sentral, to exchange the securities for others. If the trust entity fails to comply
with any law or regulation, the Bangko Sentral shall retain such interest on the securities deposited with it
for the benefit of rightful claimants. Al claims rising out of the trust business of a trust entity shall have
priority over all other claims as regards the cash or securities deposited as above provided. The Monetary
Board may not permit the cash or securities deposited in accordance with the provisions of this Section to
be reduced below the prescribed minimum amount until the depositing entity shall discontinue its trust
business and shall satisfy the Monetary Board that it has complied with all its obligations in connection
with such business. (65a)

262
Section 85. Bond of Certain Persons for the Faithful Performance of Duties. - Before an executor,
administrator, guardian, trustee, receiver or depositary appointed by the court enters upon the execution of
his duties, he shall, upon order of the court, file a bond in such sum as the court may direct. Upon the
application of any executor, administrator, guardian, trustee, receiver, depositary or any other person in
interest, the court may, after notice and hearing, order that the subject matter of the trust or any part,
thereof be deposited with a trust entity. Upon presentation of proof to the court that the subject matter of
the trust has been deposited with a trust entity. Upon presentation of proof to the court that the subject
matter of the trust has been deposited with a trust entity, the court may order that the bond given by such
persons for the faithful performance of their duties be reduced to such sums as it may deem proper:
Provided, however, That the reduced bond shall be sufficient to secure adequately the proper
administration and care of any property remaining under the control of such persons and the proper
accounting for such property. Property deposited with any trust entity in conformity with this Section
shall be held by such entity under the orders and direction of the court. (59)

Section 86. Exemption of Trust Entity from Bond Requirement. - No bond or other security shall be
required by the court from a trust entry for the faithful performance of its duties as court-appointed
trustee, executor, administrator, guardian, receiver, or depositary. However, the court may, upon proper
application with it showing special cause therefore, require the trust entity to post a bond or other security
for the protection of funds or property confided to such entity. (59)

Section 87. Separation of Trust Business from General Business. - The trust business and all funds,
properties or securities received by any trust entity as executor, administrator, guardian, trustee, receiver,
or depositary shall be kept separate and distinct from the general business including all other funds,
properties, and assets of such trust entity. The accounts of all such funds, properties, or securities shall
likewise be kept separate and distinct from the accounts of the general business of the trust entity. (61)

Section 88. Investment Limitations of a Trust Entity. - Unless otherwise directed by the instrument
creating the trust, the lending and investment of funds and other assets acquired by a trust entity as
executor, administrator, guardian, trustee, receiver or depositary of the estate of any minor or other
incompetent person shall be limited to loans or investments as may be prescribed by law, the Monetary
Board or any court of competent jurisdiction. (63a)

Section 89. Real Estate Acquired by a Trust Entity. - Unless otherwise specifically directed by the trustor
or the nature of the trust, real estate acquired by a trust entity in whatever manner and for whatever
purposes, shall likewise be governed by the relevant provisions of Section 52 of this Act. (64a)

Section 90. Investment of Non-Trust Funds. - The investment of funds other than trust funds of a trust
entity which is a bank, financing company or an investment house shall be governed by the relevant
provisions of this Act and other applicable laws. (64)

Section 91. Sanctions and Penalties. - A trust entity or any of its officers and directors found to have
willfully violated any pertinent provisions of this Act, shall be subject to the sanctions and penalties
provided tinder Section 66 of this Act as well as Sections 36 and 37 of the New Central Bank Act.

Section 92. Exemption of Trust Assets from Claims. - No assets held by a trust entity in its capacity as
trustee shall be subject to any claims other than those of the parties interested in the specific trusts. (65)

Section 93. Establishment of Branches of a Trust Entity. - The ordinary business of a trust entity shall be
transacted at the place of business specified in its articles of incorporation. Such trust entity may, with
prior approval of the Monetary Board, establish branches in the Philippines and the said entity shall be

263
responsible for all business conducted in such branches to the same extent and in the same manner as
though such business had all been conducted in the head office. For the purpose of this Act, the trust
entity and its branches shall be treated as one unit. (67)

CHAPTER X
FINAL PROVISIONS

Section 94. Phase Out of Bangko Sentral Powers Over Building and Loan Associations. - Within a period
of three (3) years from the effectivity of this Act, the Bangko Sentral shall phase out and transfer its
supervising and regulatory powers over building and loan associations to the Home Insurance and
Guaranty Corporation which shall assume the same. Until otherwise provided bylaw1 building and loan
associations shall continue to be governed by Sections 39 to 55, Chapter VI of the General Banking Act,
as amended, including such rules and regulations issued pursuant thereto. Upon assumption by the Home
Insurance and Guaranty Corporation of supervising and regulatory powers over building and loan
associations, a references in Sections 39 to 55 of the General Banking Act, as amended, to the Bangko
Sentral and the Monetary Board shall be deemed to refer to the Home Insurance and Guaranty
Corporation and its board of directors, respectively. (n)

Section 95. Repealing Clause. - Except as may be provided for in Sections 34 and 94 of this Act, the
General Banking Act, as amended, and the provisions of any other law, special charters, rule or regulation
issued pursuant to said General Banking Act, as amended, or parts thereof, which may be inconsistent
with the provisions of this Act are hereby repealed. The provisions of paragraph 8, Section 8, Republic
Act No. 3591, as amended by republic Act No. 7400, are likewise repealed. (90a)

Section 96. Separability Clause. - If any provision or section of this Act or the application thereof to any
person or circumstance is held invalid, the other provisions or sections of this Act, and the application of
such provision or section to other persons or circumstances shall not be affected thereby. (n)

Section 97. Effectivity Clause - This Act shall take effect fifteen (15) days following its publication in the
Official Gazette or in two (2) national newspapers of general circulation. (91)

Approved,

FRANKLIN M. DRILON
President of the Senate

MANUEL B. VILLAR JR.

Speaker of the House of Representatives

This Act, which is a consolidation of Senate Bill No. 1519 and House Bill No. 6814, was finally passed
by the Senate and the House of Representatives on April 12, 2000.

ROBERTO P. NAZARENO
Secretary General House of Representatives

OSCAR G. YABES
Secretary of the Senate

Approved:

264
JOSEPH EJERCITO ESTRADA
President of the Philippines

265
REPUBLIC ACT No. 10142

AN ACT PROVIDING FOR THE REHABILITATION OR LIQUIDATION OF FINANCIALLY

DISTRESSED ENTERPRISES AND INDIVIDUALS

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

CHAPTER I
GENERAL PROVISIONS

Section 1. Title. - This Act shall be known as the "Financial Rehabilitation and Insolvency Act (FRIA)
of 2010".

Section 2. Declaration of Policy. - It is the policy of the State to encourage debtors, both juridical and
natural persons, and their creditors to collectively and realistically resolve and adjust competing claims
and property rights. In furtherance thereof, the State shall ensure a timely, fair, transparent, effective and
efficient rehabilitation or liquidation of debtors. The rehabilitation or liquidation shall be made with a
view to ensure or maintain certainly and predictability in commercial affairs, preserve and maximize the
value of the assets of these debtors, recognize creditor rights and respect priority of claims, and ensure
equitable treatment of creditors who are similarly situated. When rehabilitation is not feasible, it is in the
interest of the State to facilities a speedy and orderly liquidation of these debtor's assets and the settlement
of their obligations.

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

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

Section 4. Definition of Terms. - As used in this Act, the term:

(a) Administrative expenses shall refer to those reasonable and necessary expenses:

(1) incurred or arising from the filing of a petition under the provisions of this Act;

(2) arising from, or in connection with, the conduct of the proceedings under this Act,
including those incurred for the rehabilitation or liquidation of the debtor;

(3) incurred in the ordinary course of business of the debtor after the commencement
date;

(4) for the payment of new obligations obtained after the commencement date to finance
the rehabilitation of the debtor;

(5) incurred for the fees of the rehabilitation receiver or liquidator and of the
professionals engaged by them; and

266
 (6) that are otherwise authorized or mandated under this Act or such other expenses as
may be allowed by the Supreme Court in its rules.

(b) Affiliate shall refer to a corporation that directly or indirectly, through one or more
intermediaries, is controlled by, or is under the common control of another corporation.

(c) Claim shall refer to all claims or demands of whatever nature or character against the debtor
or its property, whether for money or otherwise, liquidated or unliquidated, fixed or contingent,
matured or unmatured, disputed or undisputed, including, but not limited to; (1) all claims of the
government, whether national or local, including taxes, tariffs and customs duties; and (2) claims
against directors and officers of the debtor arising from acts done in the discharge of their
functions falling within the scope of their authority: Provided, That, this inclusion does not
prohibit the creditors or third parties from filing cases against the directors and officers acting in
their personal capacities.

(d) Commencement date shall refer to the date on which the court issues the Commencement
Order, which shall be retroactive to the date of filing of the petition for voluntary or involuntary
proceedings.

(e) Commencement Order shall refer to the order issued by the court under Section 16 of this Act.

(f) Control shall refer to the power of a parent corporation to direct or govern the financial and
operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed
to exist when the parent owns, directly or indirectly through subsidiaries or affiliates, more than
one-half (1/2) of the voting power of an enterprise unless, in exceptional circumstances, it can
clearly be demonstrated that such ownership does not constitute control. Control also exists even
when the parent owns one-half (1/2) or less of the voting power of an enterprise when there is
power:

(1) over more than one-half (1/2) of the voting rights by virtue of an agreement with
investors;

(2) to direct or govern the financial and operating policies of the enterprise under a statute
or an agreement;

(3) to appoint or remove the majority of the members of the board of directors or
equivalent governing body; or

(4) to cast the majority votes at meetings of the board of directors or equivalent
governing body.

(g) Court shall refer to the court designated by the Supreme Court to hear and determine, at the
first instance, the cases brought under this Act.

(h) Creditor shall refer to a natural or juridical person which has a claim against the debtor that
arose on or before the commencement date.

(i) Date of liquidation shall refer to the date on which the court issues the Liquidation Order.

267
(j) Days shall refer to calendar days unless otherwise specifically stated in this Act.

(k) Debtor shall refer to, unless specifically excluded by a provision of this Act, a sole
proprietorship duly registered with the Department of Trade and Industry (DTI), a partnership
duly registered with the Securities and Exchange Commission (SEC), a corporation duly
organized and existing under Philippine laws, or an individual debtor who has become insolvent
as defined herein.

(l) Encumbered property shall refer to real or personal property of the debtor upon which a lien
attaches.

(m) General unsecured creditor shall refer to a creditor whose claim or a portion thereof its
neither secured, preferred nor subordinated under this Act.

(n) Group of debtors shall refer to and can cover only: (1) corporations that are financially related
to one another as parent corporations, subsidiaries or affiliates; (2) partnerships that are owned
more than fifty percent (50%) by the same person; and (3) single proprietorships that are owned
by the same person. When the petition covers a group of debtors, all reference under these rules
to debtor shall include and apply to the group of debtors.

(o) Individual debtor shall refer to a natural person who is a resident and citizen of the Philippines
that has become insolvent as defined herein.

(p) Insolvent shall refer to the financial condition of a debtor that is generally unable to pay its or
his liabilities as they fall due in the ordinary course of business or has liabilities that are greater
than its or his assets.

(q) Insolvent debtor's estate shall refer to the estate of the insolvent debtor, which includes all the
property and assets of the debtor as of commencement date, plus the property and assets acquired
by the rehabilitation receiver or liquidator after that date, as well as all other property and assets
in which the debtor has an ownership interest, whether or not these property and assets are in the
debtor's possession as of commencement date: Provided, That trust assets and bailment, and other
property and assets of a third party that are in the possession of the debtor as of commencement
date, are excluded therefrom.

(r) Involuntary proceedings shall refer to proceedings initiated by creditors.

(s) Liabilities shall refer to monetary claims against the debtor, including stockholder's advances
that have been recorded in the debtor's audited financial statements as advances for future
subscriptions.

(t) Lien shall refer to a statutory or contractual claim or judicial charge on real or personal
property that legality entities a creditor to resort to said property for payment of the claim or debt
secured by such lien.

(u) Liquidation shall refer to the proceedings under Chapter V of this Act.

(v) Liquidation Order shall refer to the Order issued by the court under Section 112 of this Act.

268
(w) Liquidator shall refer to the natural person or juridical entity appointed as such by the court
and entrusted with such powers and duties as set forth in this Act: Provided, That, if the liquidator
is a juridical entity, it must designated a natural person who possesses all the qualifications and
none of the disqualifications as its representative, it being understood that the juridical entity and
the representative are solidarity liable for all obligations and responsibilities of the liquidator.

(x) Officer shall refer to a natural person holding a management position described in or
contemplated by a juridical entity's articles of incorporation, bylaws or equivalent documents,
except for the corporate secretary, the assistant corporate secretary and the external auditor.

(y) Ordinary course of business shall refer to transactions in the pursuit of the individual debtor's
or debtor's business operations prior to rehabilitation or insolvency proceedings and on ordinary
business terms.

(z) Ownership interest shall refer to the ownership interest of third parties in property held by the
debtor, including those covered by trust receipts or assignments of receivables.

(aa) Parent shall refer to a corporation which has control over another corporation either directly
or indirectly through one or more intermediaries.

(bb) Party to the proceedings shall refer to the debtor, a creditor, the unsecured creditors'
committee, a stakeholder, a party with an ownership interest in property held by the debtor, a
secured creditor, the rehabilitation receiver, liquidator or any other juridical or natural person who
stands to be benefited or injured by the outcome of the proceedings and whose notice of
appearance is accepted by the court.

(cc) Possessory lien shall refer to a lien on property, the possession of which has been transferred
to a creditor or a representative or agent thereof.

(dd) Proceedings shall refer to judicial proceedings commenced by the court's acceptance of a
petition filed under this Act.

(ee) Property of others shall refer to property held by the debtor in which other persons have an
ownership interest.

(ff) Publication notice shall refer to notice through publication in a newspaper of general
circulation in the Philippines on a business day for two (2) consecutive weeks.

(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of successful
operation and solvency, if it is shown that its continuance of operation is economically feasible
and its creditors can recover by way of the present value of payments projected in the plan, more
if the debtor continues as a going concern than if it is immediately liquidated.

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

(ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and viability of an
insolvent debtor can be restored using various means including, but not limited to, debt

269
 forgiveness, debt rescheduling, reorganization or quasi-reorganization, dacion en pago, debt-
equity conversion and sale of the business (or parts of it) as a going concern, or setting-up of new
business entity as prescribed in Section 62 hereof, or other similar arrangements as may be
approved by the court or creditors.

(jj) Secured claim shall refer to a claim that is secured by a lien.

(kk) Secured creditor shall refer to a creditor with a secured claim.

(ll) Secured party shall refer to a secured creditor or the agent or representative of such secured
creditor.

(mm) Securities market participant shall refer to a broker dealer, underwriter, transfer agent or
other juridical persons transacting securities in the capital market.

(nn) Stakeholder shall refer, in addition to a holder of shares of a corporation, to a member of a

nonstock corporation or association or a partner in a partnership.

(oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting stock of
which is owned or controlled directly or indirectly through one or more intermediaries by another
corporation, which thereby becomes its parent corporation.

(pp) Unsecured claim shall refer to a claim that is not secured by a lien.

(qq) Unsecured creditor shall refer to a creditor with an unsecured claim.

(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.

(ss) Voting creditor shall refer to a creditor that is a member of a class of creditors, the consent of
which is necessary for the approval of a Rehabilitation Plan under this Act.

Section 5. Exclusions. - The term debtor does not include banks, insurance companies, pre-need
companies, and national and local government agencies or units.

For purposes of this section:

(a) Bank shall refer to any duly licensed bank or quasi-bank that is potentially or actually subject
to conservatorship, receivership or liquidation proceedings under the New Central Bank Act
(Republic Act No. 7653) or successor legislation;

(b) Insurance company shall refer to those companies that are potentially or actually subject to
insolvency proceedings under the Insurance Code (Presidential Decree No. 1460) or successor
legislation; and

(c) Pre-need company shall refer to any corporation authorized/licensed to sell or offer to sell pre-
need plans.

Provided, That government financial institutions other than banks and government-owned or controlled
corporations shall be covered by this Act, unless their specific charter provides otherwise.

270
Section 6. Designation of Courts and Promulgation of Procedural Rules. - The Supreme Court shall
designate the court or courts that will hear and resolve cases brought under this Act and shall promulgate
the rules of pleading, practice and procedure to govern the proceedings brought under this Act.

Section 7. Substantive and Procedural Consolidation. - Each juridical entity shall be considered as a
separate entity under the proceedings in this Act. Under these proceedings, the assets and liabilities of a
debtor may not be commingled or aggregated with those of another, unless the latter is a related enterprise
that is owned or controlled directly or indirectly by the same interests: Provided, however, That the
commingling or aggregation of assets and liabilities of the debtor with those of a related enterprise may
only be allowed where:

(a) there was commingling in fact of assets and liabilities of the debtor and the related enterprise
prior to the commencement of the proceedings;

(b) the debtor and the related enterprise have common creditors and it will be more convenient to
treat them together rather than separately;

(c) the related enterprise voluntarily accedes to join the debtor as party petitioner and to
commingle its assets and liabilities with the debtor's; and

(d) The consolidation of assets and liabilities of the debtor and the related enterprise is beneficial
to all concerned and promotes the objectives of rehabilitation.

Provided, finally, That nothing in this section shall prevent the court from joining other entities affiliated
with the debtor as parties pursuant to the rules of procedure as may be promulgated by the Supreme
Court.

Section 8. Decisions of Creditors. - Decisions of creditors shall be made according to the relevant
provisions of the Corporation Code in the case of stock or nonstock corporations or the Civil Code in the
case of partnerships that are not inconsistent with this Act.

Section 9. Creditors Representatives. - Creditors may designate representatives to vote or otherwise act
on their behalf by filing notice of such representation with the court and serving a copy on the
rehabilitation receiver or liquidator.

Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship, Partners in a Partnership, or
Directors and Officers. - Individual debtor, owner of a sole proprietorship, partners in a partnership, or
directors and officers of a debtor shall be liable for double the value of the property sold, embezzled or
disposed of or double the amount of the transaction involved, whichever is higher to be recovered for
benefit of the debtor and the creditors, if they, having notice of the commencement of the proceedings, or
having reason to believe that proceedings are about to be commenced, or in contemplation of the
proceedings, willfully commit the following acts:

(a) Dispose or cause to be disposed of any property of the debtor other than in the ordinary course
of business or authorize or approve any transaction in fraud of creditors or in a manner grossly
disadvantageous to the debtor and/or creditors; or

(b) Conceal or authorize or approve the concealment, from the creditors, or embezzles or
misappropriates, any property of the debtor.

271
The court shall determine the extent of the liability of an owner, partner, director or officer under this
section. In this connection, in case of partnerships and corporations, the court shall consider the amount of
the shareholding or partnership or equity interest of such partner, director or officer, the degree of control
of such partner, director or officer over the debtor, and the extent of the involvement of such partner,
director or debtor in the actual management of the operations of the debtor.

Section 11. Authorization to Exchange Debt for Equity. - Notwithstanding applicable banking legislation
to the contrary, any bank, whether universal or not, may acquire and hold an equity interest or investment
in a debtor or its subsidiaries when conveyed to such bank in satisfaction of debts pursuant to a
Rehabilitation or Liquidation Plan approved by the court: Provided, That such ownership shall be subject
to the ownership limits applicable to universal banks for equity investments and: Provided, further, That
any equity investment or interest acquired or held pursuant to this section shall be disposed by the bank
within a period of five (5) years or as may be prescribed by the Monetary Board.

CHAPTER II
COURT-SUPERVISED REHABILITATION

(A) Initiation Proceedings.

(1) Voluntary Proceedings.

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

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

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

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

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

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

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

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

272
 (h) A Rehabilitation Plan;

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

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

A group of debtors may jointly file a petition for rehabilitation under this Act when one or more of its
members foresee the impossibility of meeting debts when they respectively fall due, and the financial
distress would likely adversely affect the financial condition and/or operations of the other members of
the group and/or the participation of the other members of the group is essential under the terms and
conditions of the proposed Rehabilitation Plan.

(2) Involuntary Proceedings.

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

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

(b) a creditor, other than the petitioner/s, has initiated foreclosure proceedings against the debtor
that will prevent the debtor from paying its debts as they become due or will render it insolvent.

Section 14. Petition to Initiate Involuntary Proceedings. - The creditor/s' petition for rehabilitation shall
be verified to establish the substantial likelihood that the debtor may be rehabilitated, and include:

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

(b) the circumstances sufficient to support a petition to initiate involuntary rehabilitation

proceedings under Section 13 of this Act;

(c) the specific relief sought under this Act;

(d) a Rehabilitation Plan;

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

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

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

(B) Action on the Petition and Commencement of Proceedings.

273
Section 15. Action on the Petition. - If the court finds the petition for rehabilitation to be sufficient in
form and substance, it shall, within five (5) working days from the filing of the petition, issue a
Commencement Order. If, within the same period, the court finds the petition deficient in form or
substance, the court may, in its discretion, give the petitioner/s a reasonable period of time within which
to amend or supplement the petition, or to submit such documents as may be necessary or proper to put
the petition in proper order. In such case, the five (5) working days provided above for the issuance of the
Commencement Order shall be reckoned from the date of the filing of the amended or supplemental
petition or the submission of such documents.

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

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

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

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

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

(e) declare that the debtor is under rehabilitation;

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

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

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

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

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

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

274
 (l) authorize the payment of administrative expenses as they become due;

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

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

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

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

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

(1) suspend all actions or proceedings, in court or otherwise, for the enforcement of
claims against the debtor;

(2) suspend all actions to enforce any judgment, attachment or other provisional remedies
against the debtor;

(3) prohibit the debtor from selling, encumbering, transferring or disposing in any manner
any of its properties except in the ordinary course of business; and

(4) prohibit the debtor from making any payment of its liabilities outstanding as of the
commencement date except as may be provided herein.

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

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

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

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

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

275
 (e) consolidate the resolution of all legal proceedings by and against the debtor to the court
Provided. However, That the court may allow the continuation of cases on other courts where the
debtor had initiated the suit.

Attempts to seek legal of other resource against the debtor outside these proceedings shall be sufficient to
support a finding of indirect contempt of court.

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

(a) to cases already pending appeal in the Supreme Court as of commencement

date Provided, That any final and executory judgment arising from such appeal shall be referred
to the court for appropriate action;

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

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

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

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

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

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

Section 19. Waiver of taxes and Fees Due to the National Government and to Local Government Units
(LGUs). - Upon issuance of the Commencement Order by the court, and until the approval of the
Rehabilitation Plan or dismissal of the petition, whichever is earlier, the imposition of all taxes and fees
including penalties, interests and charges thereof due to the national government or to LGUs shall be
considered waived, in furtherance of the objectives of rehabilitation.

Section 20. Application of Stay or Suspension Order to Government Financial Institutions. - The
provisions of this Act concerning the effects of the Commencement Order and the Stay or Suspension
Order on the suspension of rights to foreclose or otherwise pursue legal remedies shall apply to

276
government financial institutions, notwithstanding provisions in their charters or other laws to the
contrary.

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

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

(b) There is sufficient monitoring by the rehabilitation receiver of the debtor's business for the
protection of creditors;

(c) The debtor has met with its creditors to the extent reasonably possible in attempts to reach
consensus on the proposed Rehabilitation Plan;

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

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

(2) there is sufficient cash flow to maintain the operations of the debtor;

(3) the debtor's, partners, stockholders, directors and officers have been acting in good
faith and which due diligence;

(4) the petition is not s sham filing intended only to delay the enforcement of the rights of
the creditor's or of any group of creditors; and

(5) the debtor would likely be able to pursue a viable Rehabilitation Plan;

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

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

(g) The debtor has not committed acts misrepresentation or in fraud of its creditor/s or a group of
creditors.

Section 22. Action at the Initial Hearing. - At the initial hearing, the court shall:

277
 (a) determine the creditors who have made timely and proper filing of their notice of claims;

(b) hear and determine any objection to the qualifications of the appointment of the rehabilitation
receiver and, if necessary appoint a new one in accordance with this Act;

(c) direct the creditors to comment on the petition and the Rehabilitation Plan, and to submit the
same to the court and to the rehabilitation receiver within a period of not more than twenty (20)
days; and

(d) direct the rehabilitation receiver to evaluate the financial condition of the debtor and to
prepare and submit to the court within forty (40) days from initial hearing the report provided in
Section 24 hereof.

Section 23. Effect of Failure to File Notice of Claim. - A creditor whose claim is not listed in the schedule
of debts and liabilities and who fails to file a notice of claim in accordance with the Commencement
Order but subsequently files a belated claim shall not be entitled to participate in the rehabilitation
proceedings but shall be entitled to receive distributions arising therefrom.

Section 24. Report of the Rehabilitation Receiver. - Within forty (40) days from the initial hearing and
with or without the comments of the creditors or any of them, the rehabilitation receiver shall submit a
report to the court stating his preliminary findings and recommendations on whether:

(a) the debtor is insolvent and if so, the causes thereof and any unlawful or irregular act or acts
committed by the owner/s of a sole proprietorship partners of a partnership or directors or officers
of a corporation in contemplation of the insolvency of the debtor or which may have contributed
to the insolvency of the debtor;

(b) the underlying assumptions, the financial goals and the procedures to accomplish such goals
as stated in the petitioner's Rehabilitation Plan are realistic, feasible and reasonable;

(c) there is a substantial likelihood for the debtor to be successfully rehabilitated;

(d) the petition should be dismissed; and

(e) the debtor should be dissolved and/or liquidated.

Section 25. Giving Due Course to or Dismissal of Petition, or Conversion of Proceedings. - Within ten
(10) days from receipt of the report of the rehabilitation receiver mentioned in Section 24 hereof the court
may:

(a) give due course to the petition upon a finding that:

(1) the debtor is insolvent; and

(2) there is a substantial likelihood for the debtor to be successfully rehabilitated;

(b) dismiss the petition upon a finding that:

(1)debtor is not insolvent;

278
 (2) the petition i8 a sham filing intended only to delay the enforcement of the rights of the
creditor/s or of any group of creditors;

(3)the petition, the Rehabilitation Plan and the attachments thereto contain any materially
false or misleading statements; or

(4)the debtor has committed acts of misrepresentation or in fraud of its creditor/s or a

group of creditors;

(c)convert the proceedings into one for the liquidation of the debtor upon a finding that:

(1)the debtor is insolvent; and

(2)there is no substantial likelihood for the debtor to be successfully rehabilitated as

determined in accordance with the rules to be promulgated by the Supreme Court.

Section 26.Petition Given Due Course. - If the petition is given due course, the court shall direct the
rehabilitation receiver to review, revise and/or recommend action on the Rehabilitation Plan and submit
the same or a new one to the court within a period of not more than ninety (90) days.

The court may refer any dispute relating to the Rehabilitation Plan or the rehabilitation proceedings
pending before it to arbitration or other modes of dispute resolution, as provided for under Republic Act
No. 9285, Or the Alternative Dispute Resolution Act of 2004, should it determine that such mode will
resolve the dispute more quickly, fairly and efficiently than the court.

Section 27.Dismissal of Petition. - If the petition is dismissed pursuant to paragraph (b) of Section 25
hereof, then the court may, in its discretion, order the petitioner to pay damages to any creditor or to the
debtor, as the case may be, who may have been injured by the filing of the petition, to the extent of any
such injury.

(C) The Rehabilitation Receiver, Management Committee and Creditors' Committee.

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

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

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

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

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

279
 (d)Has no conflict of interest: Provided, That such conflict of interest may be waived, expressly
or impliedly, by a party who may be prejudiced thereby.

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

Section 30.Initial Appointment of the Rehabilitation Receiver. - The court shall initially appoint the
rehabilitation receiver, who mayor may not be from among the nominees of the petitioner, However, at
the initial hearing of the petition, the creditors and the debtor who are not petitioners may nominate other
persons to the position. The court may retain the rehabilitation receiver initially appointed or appoint
another who mayor may not be from among those nominated.

In case the debtor is a securities market participant, the court shall give priority to the nominee of the
appropriate securities or investor protection fund.

If a qualified natural person or entity is nominated by more than fifty percent (50%) of the secured
creditors and the general unsecured creditors, and satisfactory evidence is submitted, the court shall
appoint the creditors' nominee as rehabilitation receiver.

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

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

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

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

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

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

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

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

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

280
 (i) To monitor the operations and the business of the debtor to ensure that no payments or
transfers of property are made other than in the ordinary course of business;

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

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

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

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

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

To submit a status report on the rehabilitation proceedings every quarter or as may be required by
the court motu proprio. or upon motion of any creditor. or as may be provided, in the
Rehabilitation Plan.

Unless appointed by the court, pursuant to Section 36 hereof, the rehabilitation receiver shall not
take over the management and control of the debtor but may recommend the appointment of a
management committee over the debtor in the cases provided by this Act.

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

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

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

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

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

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

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

Section 33.Compensation and Terms of Service. The rehabilitation receiver and his direct employees or
independent contractors shall be entitled to compensation for reasonable fees and expenses from the
debtor according to the terms approved by the court after notice and hearing. Prior to such hearing, the

281
rehabilitation receiver and his direct employees shall be entitled to reasonable compensation based
on quantum meruit. Such costs shall be considered administrative expenses.

Section 34.Oath and Bond of the Rehabilitation Receiver. Prior to entering upon his powers, duties and
responsibilities, the rehabilitation receiver shall take an oath and file a bond, in such amount to be fixed
by the court, conditioned upon the faithful and proper discharge of his powers, duties and responsibilities.

Section 35.Vacancy. - Incase the position of rehabilitation receiver is vacated for any reason whatsoever.
the court shall direct the debtor and the creditors to submit the name/s of their nominee/s to the position.
The court may appoint any of the qualified nominees. or any other person qualified for the position.

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

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

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

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

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

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

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

(2) authorize him to engage the services or to employ persona or entities to assist him in the
discharge of his managerial functions; and

(3) authorize a commensurate increase in his compensation.

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

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

Section 38.Qualifications of Members of the Management Committee. - The qualifications and

disqualifications of the members of the management committee shall be set forth in the procedural rules,
taking into consideration the nature of the business of the debtor and the need to protect the interest of all
stakeholders concerned.

282
Section 39.Employment of Professionals. - Upon approval of the court, and after notice and hearing, the
rehabilitation receiver or the management committee may employ specialized professionals and other
experts to assist each in the performance of their duties. Such professionals and other experts shall be
considered either employees or independent contractors of the rehabilitation receiver or the management
committee, as the case may be. The qualifications and disqualifications of the professionals and experts
may be set forth in procedural rules, taking into consideration the nature of the business of the debtor and
the need to protect the interest of all stakeholders concerned.

Section 40.Conflict of Interest. - No person may be appointed as a rehabilitation receiver, member of a_

management committee, or be employed by the rehabilitation receiver or the management committee if he
has a conflict of interest.

An individual shall be deemed to have a conflict of interest if he is so situated as to be materially

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

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

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

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

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

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

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

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

Section 41.Immunity. - The rehabilitation receiver and all persons employed by him, and the members of
the management committee and all persons employed by it, shall not be subject to any action. claim or
demand in connection with any act done or omitted to be done by them in good faith in connection with
the exercise of their powers and functions under this Act or other actions duly approved by the
court.1awp++il

Section 42.Creditors' Committee. - After the creditors' meeting called pursuant to Section 63 hereof, the
creditors belonging to a class may formally organize a committee among

283
themselves. In addition, the creditors may, as a body, agree to form a creditors' committee composed of a
representative from each class of creditors, such as the following:

(a) Secured creditors;

(b) Unsecured creditors;

(c) Trade creditors and suppliers; and

(d) Employees of the debtor.

In the . election of the creditors' representatives, the rehabilitation receiver or his representative shall
attend such meeting and extend the appropriate assistance as may be defined in the procedural rules.

Section 43.Role of Creditors' Committee. - The creditors' committee when constituted pursuant to Section
42 of this Act shall assist the rehabilitation receiver in communicating with the creditors and shall be the
primary liaison between the rehabilitation receiver and the creditors. The creditors' committee cannot
exercise or waive any right or give any consent on behalf of any creditor unless specifically authorized in
writing by such creditor. The creditors' committee may be authorized by the court or by the rehabilitation
receiver to perform such other tasks and functions as may be defined by the procedural rules in order to
facilitate the rehabilitation process.

(D) Determination of Claims.

Section 44.Registry of Claims. - Within twenty (20) days from his assumption into office, the
rehabilitation receiver shall establish a preliminary registry of claims. The rehabilitation receiver shall
make the registry available for public inspection and provide

publication notice to the debtor, creditors and stakeholders on where and when they may inspect it. All
claims included in the registry of claims must be duly supported by sufficient evidence.

Section 45.Opposition or Challenge of Claims. Within thirty (30) days from the expiration of the period
stated in the immediately preceding section, the debtor, creditors, stakeholders and other interested parties
may submit a challenge to claim/s to the court, serving a certified copy on the rehabilitation receiver and
the creditor holding the challenged claim/so Upon the expiration of the thirty (30)-day period, the
rehabilitation receiver shall submit to the court the registry of claims which shall include undisputed
claims that have not been subject to challenge.

Section 46.Appeal. - Any decision of the rehabilitation receiver regarding a claim may be appealed to the
court.

(E) Governance.

Section 47.Management. - Unless otherwise provided herein, the management of the juridical debtor shall
remain with the existing management subject to the applicable law/s and agreement/s, if any, on the
election or appointment of directors, managers Or managing partner. However, all disbursements,
payments or sale, disposal, assignment, transfer or encumbrance of property , or any other act affecting
title or interest in property, shall be subject to the approval of the rehabilitation receiver and/or the court,
as provided in the following subchapter.

284
(F) Use, Preservation and Disposal of Assets and Treatment of Assets and Claims after
Commencement Date.

Section 48.Use or Disposition of Assets. - Except as otherwise provided herein, no funds or property of
the debtor shall he used or disposed of except in the ordinary course of business of the debtor, or unless
necessary to finance the administrative expenses of the rehabilitation proceedings.

Section 49.Sale of Assets. - The court, upon application of the rehabilitation receiver, may authorize the
sale of unencumbered property of the debtor outside the ordinary course of business upon a showing that
the property, by its nature or because of other circumstance, is perishable, costly to maintain, susceptible
to devaluation or otherwise injeopardy.

Section 50.Sale or Disposal of Encumbered Property of the Debtor and Assets of Third Parties Held by
Debtor. The court may authorize the sale, transfer, conveyance or disposal of encumbered property of the
debtor, or property of others held by the debtor where there is a security interest pertaining to third parties
under a financial, credit or other similar transactions if, upon application of the rehabilitation receiver and
with the consent of the affected owners of the property, or secured creditor/s in the case of encumbered
property of the debtor and, after notice and hearing, the court determines that:

(a) such sale, transfer, conveyance or disposal is necessary for the continued operation of the
debtor's business; and

(b) the debtor has made arrangements to provide a substitute lien or ownership right that provides
an equal level of security for the counter-party's claim or right.

Provided, That properties held by the debtor where the debtor has authority to sell such as trust receipt or
consignment arrangements may be sold or disposed of by the .debtor, if such sale or disposal is necessary
for the operation of the debtor's business, and the debtor has made arrangements to provide a substitute
lien or ownership right that provides an equal level of security for the counter-party's claim or right.

Sale or disposal of property under this section shall not give rise to any criminal liability under applicable
laws.

Section 51.Assets of Debtor Held by Third Parties. In the case of possessory pledges, mechanic's liens
or similar claims, third parties who have in their possession or control property of the debtor shall not
transfer, conveyor otherwise dispose of the same to persons other than the debtor, unless upon prior
approval of the rehabilitation receiver. The rehabilitation receiver may also:

(a) demand the surrender or the transfer of the possession or control of such property to the
rehabilitation receiver or any other person, subject to payment of the claims secured by any
possessory Iien/s thereon;

(b) allow said third parties to retain possession or control, if such an arrangement would more
likely preserve or increase the value of the property in question or the total value of the assets of
the debtor; or

(c) undertake any otI1er disposition of the said property as may be beneficial for the rehabilitation
of the debtor, after notice and hearing, and approval of the court.

285
Section 52.Rescission or Nullity of Sale, Payment, Transfer or Conveyance of Assets. - The court may
rescind or declare as null and void any sale, payment, transfer or conveyance of the debtor's
unencumbered property or any encumbering thereof by the debtor or its agents or representatives after the
commencement date which are not in the ordinary course of the business of the debtor: Provided,
however, That the unencumbered property may be sold, encumbered or otherwise disposed of upon order
of the court after notice and hearing:

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

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

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

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

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

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

Section 53.Assets Subject to Rapid Obsolescence, Depreciation and Diminution of Value. - Upon the
application of a secured creditor holding a lien against or holder of an ownership interest in property held
by the debtor that is subject to potentially rapid obsolescence, depreciation or diminution in value, the
court shall, after notice and hearing, order the debtor or rehabilitation receiver to take reasonable steps
necessary to prevent the depreciation. If depreciation cannot be avoided and such depreciation is
jeopardizing the security or property interest of the secured creditor or owner, the court shall:

(a) allow the encumbered property to be foreclosed upon by the secured creditor according to the
relevant agreement between the debtor and the secured creditor, applicable rules of procedure and
relevant legislation: Provided. That the proceeds of the sale will be distributed in accordance with
the order prescribed under the rules of concurrence and preference of credits; or

(b) upon motion of, or with the consent of the affected secured creditor or interest owner. order
the conveyance of a lien against or ownership interest in substitute property of the debtor to the
secured creditor: Provided. That other creditors holding liens on such property, if any, do not
object thereto, or, if such property is not available;

(c) order the conveyance to the secured creditor or holder . of an ownership interest of a lien on
the residual funds from the sale of encumbered property during the proceedings; or

(d) allow the sale or disposition of the property: Provided. That the sale or disposition will
maximize the value of the property for the benefit of the secured creditor and the debtor, and the
proceeds of the sale will be distributed in accordance with the order prescribed under the rules of
concurrence and preference of credits.

Section 54.Post-commencement Interest. - The rate and term of interest, if any, on secured and unsecured
claims shall be determined and provided for in the approved Rehabilitation Plan.

286
Section 55.Post-commencement Loans and Obligations. - With the approval of the court upon the
recommendation of the rehabilitation receiver, the debtor, in order to enhance its

rehabilitation. may:

(a) enter into credit arrangements; or

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

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

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

Section 56.Treatment of Employees, Claims. Compensation of employees required to carry on the

business shall be considered an administrative expense. Claims of separation pay for months worked prior
to the commencement date shall be considered a pre- ommencement claim. Claims for salary and
separation pay for work performed after the commencement date shall be an administrative expense.

Section 57.Treatment of Contracts. - Unless cancelled by virtue of a final judgment of a court of

competent jurisdiction issued prior to the issuance of the Commencement Order, or at anytime thereafter
by the court before which the rehabilitation proceedings are pending, all valid and subbsisting contracts of
the debtor with creditors and other third parties as at the commencement date shall continue in
force: Provided, That within ninety (90) days following the commencement of proceedings, the debtor,
with the consent of the rehabilitation receiver, shall notify each contractual counter-party of whether it is
confirming the particular contract. Contractual obligations of the debtor arising or performed during this
period, and afterwards for confirmed contracts, shall be considered administrative expenses. Contracts not
confirmed within the required deadline shall be considered terminated. Claims for actual damages, if any,
arising as a result of the election to terminate a contract shall be considered a pre-commencement claim
against the debtor. Nothing contained herein shall prevent the cancellation or termination of any contract
of the debtor for any ground provided by law.

(G) Avoidance Proceedings.

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

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

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

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

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

287
 (d) involves creditors, where a creditor obtained, or received the benefit of, more than its pro
rata share in the assets of the debtor, executed at a time when the debtor was insolvent; or

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

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

Section 59.Actions for Rescission or Nullity. - (a) The rehabilitation receiver or, with his conformity, any
creditor may initiate and prosecute any action to rescind, or declare null and void any transaction
described in Section 58 hereof. If the rehabilitation receiver does not consent to the filing or prosecution
of such action,

(b) If leave of court is granted under subsection (a), the rehabilitation receiver shall assign and transfer to
the creditor all rights, title and interest in the chose in action or subject matter of the proceeding, including
any document in support thereof.

(c) Any benefit derived from a proceeding taken pursuant to subsection (a), to the extent of his claim and
the costs, belongs exclusively to the creditor instituting the proceeding, and the surplus, if any, belongs to
the estate.

(d) Where, before an order is made under subsection (a), the rehabilitation receiver (or liquidator)
signifies to the court his readiness to institute the proceeding for the benefit of the creditors, the order
shall fix the time within which he shall do so and, m that case, the benefit derived from the proceeding, if
instituted within the time limits so fixed, belongs to the estate.

(H) Treatment of Secured Creditors.

Section 60.No Diminution of Secured Creditor Rights. The issuance of the Commencement Order and the
Suspension or Stay Order, and any other provision of this Act, shall not be

deemed in any way to diminish or impair the security or lien of a secured creditor, or the value of his lien
or security, except that his right to enforce said security or lien may be suspended during the term of the
Stay Order.

The court, upon motion or recommendation of the rehabilitation receiver, may allow a secured creditor to
enforce his security or lien, or foreclose upon property of the debtor

securing his/its claim, if the said property is not necessary for the rehabilitation of the debtor. The secured
creditor and/or the other lien holders shall be admitted to the rehabilitation proceedings only for the
balance of his claim, if any.

Section 61.Lack of Adequate Protection. - The court, on motion or motu proprio, may terminate, modify
or set conditions for the continuance of suspension of payment, or relieve a claim from the coverage
thereof, upon showing that: (a) a creditor does not have adequate protection over property securing its
claim; or

288
(b) the value of a claim secured by a lien on property which is not necessary for rehabilitation of the
debtor exceeds the fair market value of the said property.

For purposes of this section, a creditor shall be deemed to lack adequate protection if it can be shown that:

(a) the debtor fails or refuses to honor a pre-existing agreement with the creditor to keep the
property insured;

(b) the debtor fails or refuses to take commercially reasonable steps to maintain the property; or

(c) the property has depreciated to an extent that the creditor is under secured.

Upon showing of a lack of protection, the court shall order the debtor or the rehabilitation receiver to
make arrangements to provide for the insurance or maintenance of the property; or to make payments or
otherwise provide additional or replacement security such that the obligation is fully secured. If such
arrangements are not feasible, the court may modify the Stay Order to allow the secured creditor lacking
adequate protection to enforce its security claim against the debtor: Provided, however, That the court
may deny the creditor the remedies in this paragraph if the property subject of the enforcement is required
for the rehabilitation of the debtor.

(i) Administration of Proceedings.

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

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

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

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

(d) establish classes of voting creditors;

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

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

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

289
(h) provide for equal treatment of all claims within the same class or subclass, unless a particular
creditor voluntarily agrees to less favorable treatment;

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

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

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

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

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

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

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

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

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

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

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

(t) include a certified copy of a certificate of tax clearance or evidence of a compromise

settlement with the BIR;

(u) include a valid and binding r(,solution of a meeting of the debtor's stockholders to increase the
shares by the required amount in cases where the Plan contemplates an additional issuance of
shares by the debtor;

(v) state the compensation and status, if any, of the rehabilitation receiver after the approval of the
Plan; and

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

290
Section 63.Consultation with Debtor and Creditors. if the court gives due course to the petition, the
rehabilitation receiver shall confer with the debtor and all the classes of creditors, and may consider their
views and proposals ill the review, revision or preparation of a new Rehabilitation Plan.

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

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

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

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

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

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

Section 65.Submission of Rehabilitation Plan to the Court. - 1fthe Rehabilitation Plan is approved, the
rehabilitation receiver shall submit the same to the court for confirmation. Within five (5) days from
receipt of the Rehabilitation Plan, the court shall notify the creditors that the Rehabilitation Plan has been
submitted for confirmation, that any creditor may obtain copies of the Rehabilitation Plan and that any
creditor may file an objection thereto.

Section 66.Filing of Objections to Rehabilitation Plan. A creditor may file an objection to the
Rehabilitation Plan within twenty (20) days from receipt of notice from the court that the Rehabilitation
Plan has been submitted for confirmation. Objections to a Rehabilitation Plan shall be limited to the
following:

(a) The creditors' support was induced by fraud;

(b)The documents or data relied upon in the Rehabilitation Plan are materially false or
misleading; or

(c)The Rehabilitation Plan is in fact not supported by the voting creditors.

Section 67.Hearing on the Objections. - If objections have been submitted during the relevant period, the
court shall issue an order setting the time and date for the hearing or hearings on the objections.

291
If the court finds merit in the objection, it shall order the rehabilitation receiver or other party to cure the
defect, whenever feasible. If the court determines that the debtor acted in bad faith, or that it is not
feasible to cure the defect, the court shall convert the proceedings into one for the liquidation of the
debtor under Chapter V of this Act.

Section 68.Confirmation of the Rehabilitation Plan. If no objections are filed within the relevant period
or, if objections are filed, the court finds them lacking in merit, or determines that the basis for the
objection has been cured, or determines that the debtor has complied with an order to cure the objection,
the court shall issue an order confirming the Rehabilitation Plan.

The court may confirm the Rehabilitation Plan notwithstanding unresolved disputes over claims if the
Rehabilitation Plan has made adequate provisions for paying such claims.

For the avoidance of doubt, the provisions of other laws to the contrary notwithstanding, the court shall
have the power to approve or implement the Rehabilitation Plan despite the lack of approval, or objection
from the owners, partners or stockholders of the insolvent debtor: Provided, That the terms thereof are
necessary to restore the financial well-being and viability of the insolvent debtor.

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

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

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

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

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

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

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

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

Section 70. Liability of General Partners of a Partnership for Unpaid Balances Under an Approved
Plan. - The approval of the Plan shall not affect the rights of creditors to pursue actions against the

292
general partners of a partnership to the extent they are liable under relevant legislation for the debts
thereof.

Section 71. Treatment of Amounts of Indebtedness or Obligations Forgiven or Reduced. - Amounts of

any indebtedness or obligations reduced or forgiven in connection with a Plan's approval shall not be
subject to any tax in furtherance of the purposes of this Act.

Section 72. Period for Confirmation of the Rehabilitation Plan. - The court shall have a maximum period
of one (1) year from the date of the filing of the petition to confirm a Rehabilitation Plan.

If no Rehabilitation Plan is confirmed within the said period, the proceedings may upon motion or motu
propio, be converted into one for the liquidation of the debtor .

Section 73. Accounting Discharge of Rehabilitation Receiver. - Upon the confirmation of the
Rehabilitation Plan, the rehabilitation receiver shall provide a final report and accounting to the court.
Unless the Rehabilitation Plan specifically requires and describes the role of the rehabilitation receiver
after the approval of the Rehabilitation Plan, the court shall discharge the rehabilitation receiver of his
duties.

(j) Termination of Proceedings

Section 74. Termination of Proceedings. - The rehabilitation proceedings under Chapter II shall, upon
motion by any stakeholder or the rehabilitation receiver be terminated by order of the court either
declaring a successful implementation of the Rehabilitation Plan or a failure of rehabilitation.

There is failure of rehabilitation in the following cases:

(a) Dismissal of the petition by the court;

(b) The debtor fails to submit a Rehabilitation Plan;

(c) Under the Rehabilitation Plan submitted by the debtor, there is no substantial likelihood that
the debtor can be rehabilitated within a reasonable period;

(d) The Rehabilitation Plan or its amendment is approved by the court but in the implementation
thereof, the debtor fails to perform its obligations thereunder or there is a failure to realize the
objectives, targets or goals set forth therein, including the timelines and conditions for the
settlement of the obligations due to the creditors and other claimants;

(e) The commission of fraud in securing the approval of the Rehabilitation Plan or its
amendment; and

(f) Other analogous circumstances as may be defined by the rules of procedure.

Upon a breach of, or upon a failure of the Rehabilitation Plan the court, upon motion by an affected party
may:

(1) Issue an order directing that the breach be cured within a specified period of time, falling
which the proceedings may be converted to a liquidation;

293
 (2) Issue an order converting the proceedings to a liquidation;

(3) Allow the debtor or rehabilitation receiver to submit amendments to the Rehabilitation Plan,
the approval of which shall be governed by the same requirements for the approval of a
Rehabilitation Plan under this subchapter;

(4) Issue any other order to remedy the breach consistent with the present regulation, other
applicable law and the best interests of the creditors; or

(5) Enforce the applicable provisions of the Rehabilitation Plan through a writ of execution.

Section 75. Effects of Termination. - Termination of the proceedings shall result in the following:

(a) The discharge of the rehabilitation receiver subject to his submission of a final accounting;
and

(b) The lifting of the Stay Order and any other court order holding in abeyance any action for the
enforcement of a claim against the debtor.

Provided, however, That if the termination of proceedings is due to failure of rehabilitation or dismissal of
the petition for reasons other than technical grounds, the proceedings shall be immediately converted to
liquidation as provided in Section 92 of this Act.

CHAPTER III
PRE-NEGOTIATED REHABILITATION

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

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

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

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

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

Section 77. Issuance of Order. - Within five (5) working days, and after determination that the petition is
sufficient in form and substance, the court shall issue an Order which shall;

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

294
 (b) declare that the debtor is under rehabilitation;

(c) summarize the ground./s for the filling of the petition;

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

(e) direct the service by personal delivery of a copy of the petition on each creditor who is not a
petitioner holding at least ten percent (10%) of the total liabilities of the debtor, as determined in
the schedule attached to the petition, within three (3) days;

(f) state that copies of the petition and the Rehabilitation Plan are available for examination and
copying by any interested party;

(g) state that creditors and other interested parties opposing the petition or Rehabilitation Plan
may file their objections or comments thereto within a period of not later than twenty (20) days
from the second publication of the Order;

(h) appoint a rehabilitation receiver, if provided for in the Plan; and

(i) include a Suspension or Stay Order as described in this Act.

Section 78. Approval of the Plan. - Within ten (10) days from the date of the second publication of the
Order, the court shall approve the Rehabilitation Plan unless a creditor or other interested party submits
an objection to it in accordance with the next succeeding section.

Section 79. Objection to the Petition or Rehabilitation Plan. - Any creditor or other interested party may
submit to the court a verified objection to the petition or the Rehabilitation Plan not later than eight (8)
days from the date of the second publication of the Order mentioned in Section 77 hereof. The objections
shall be limited to the following:

(a) The allegations in the petition or the Rehabilitation Plan or the attachments thereto are
materially false or misleading;

(b) The majority of any class of creditors do not in fact support the Rehabilitation Plan;

(c) The Rehabilitation Plan fails to accurately account for a claim against the debtor and the claim
in not categorically declared as a contested claim; or

(d) The support of the creditors, or any of them was induced by fraud.

Copies of any objection to the petition of the Rehabilitation Plan shall be served on the debtor, the
rehabilitation receiver (if applicable), the secured creditor with the largest claim and who supports the
Rehabilitation Plan, and the unsecured creditor with the largest claim and who supports the Rehabilitation
Plan.

Section 80. Hearing on the Objections. - After receipt of an objection, the court shall set the same for
hearing. The date of the hearing shall be no earlier than twenty (20) days and no later than thirty (30) days

295
from the date of the second publication of the Order mentioned in Section 77 hereof. If the court finds
merit in the objection, it shall direct the debtor, when feasible to cure the detect within a reasonable
period. If the court determines that the debtor or creditors supporting the Rehabilitation Plan acted in bad
faith, or that the objection is non-curable, the court may order the conversion of the proceedings into
liquidation. A finding by the court that the objection has no substantial merit, or that the same has been
cured shall be deemed an approval of the Rehabilitation Plan.

Section 81. Period for Approval of Rehabilitation Plan. - The court shall have a maximum period of one
hundred twenty (120) days from the date of the filing of the petition to approve the Rehabilitation Plan. If
the court fails to act within the said period, the Rehabilitation Plan shall be deemed approved.

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

CHAPTER IV
OUT-OF-COURT OR INFORMAL RESTRUCTURING AGREEMENTS OR
REHABILITATION PLANS

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

Section 84. Minimum Requirements of Out-of-Court or Informal Restructuring Agreements and

Rehabilitation Plans.- For an out-of-court or informal restructuring/workout agreement or Rehabilitation
Plan to qualify under this chapter, it must meet the following minimum requirements:

(a) The debtor must agree to the out-of-court or informal restructuring/workout agreement or
Rehabilitation Plan;

(b) It must be approved by creditors representing at least sixty-seven (67%) of the secured
obligations of the debtor;

(c) It must be approved by creditors representing at least seventy-five percent (75%) of the
unsecured obligations of the debtor; and

(d) It must be approved by creditors holding at least eighty-five percent (85%) of the total
liabilities, secured and unsecured, of the debtor.

Section 85. Standstill Period. - A standstill period that may be agreed upon by the parties pending
negotiation and finalization of the out-of-court or informal restructuring/workout agreement or
Rehabilitation Plan contemplated herein shall be effective and enforceable not only against the
contracting parties but also against the other creditors: Provided, That (a) such agreement is approved by
creditors representing more than fifty percent (50%) of the total liabilities of the debtor; (b) notice thereof
is publishing in a newspaper of general circulation in the Philippines once a week for two (2) consecutive
weeks; and (c) the standstill period does not exceed one hundred twenty (120) days from the date of
effectivity. The notice must invite creditors to participate in the negotiation for out-of-court rehabilitation
or restructuring agreement and notify them that said agreement will be binding on all creditors if the
required majority votes prescribed in Section 84 of this Act are met.

296
Section 86. Cram Down Effect. - A restructuring/workout agreement or Rehabilitation Plan that is
approved pursuant to an informal workout framework referred to in this chapter shall have the same legal
effect as confirmation of a Plan under Section 69 hereof. The notice of the Rehabilitation Plan or
restructuring agreement or Plan shall be published once a week for at least three (3) consecutive weeks in
a newspaper of general circulation in the Philippines. The Rehabilitation Plan or restructuring agreement
shall take effect upon the lapse of fifteen (15) days from the date of the last publication of the notice
thereof.

Section 87. Amendment or Modification. - Any amendment of an out-of-court restructuring/workout

agreement or Rehabilitation Plan must be made in accordance with the terms of the agreement and with
due notice on all creditors.

Section 88. Effect of Court Action or Other Proceedings. - Any court action or other proceedings arising
from, or relating to, the out-of-court or informal restructuring/workout agreement or Rehabilitation Plan
shall not stay its implementation, unless the relevant party is able to secure a temporary restraining order
or injunctive relief from the Court of Appeals.

Section 89. Court Assistance. - The insolvent debtor and/or creditor may seek court assistance for the
execution or implementation of a Rehabilitation Plan under this Chapter, under such rules of procedure as
may be promulgated by the Supreme Court.

CHAPTER V
LIQUIDATION OF INSOLVENT JURIDICAL DEBTORS

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

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

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

(c) the names of at least three (3) nominees to the position of liquidator.

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

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

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

297
 (a) there is no genuine issue of fact or law on the claims/s of the petitioner/s, and that the due and
demandable payments thereon have not been made for at least one hundred eighty (180) days or
that the debtor has failed generally to meet its liabilities as they fall due; and

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

At any time during the pendency of or after a rehabilitation court-supervised or pre-negotiated

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

If the petition or motion is sufficient in form and substance, the court shall issue an Order:

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

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

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

Section 92. Conversion by the Court into Liquidation Proceedings. - During the pendency of court-
supervised or pre-negotiated rehabilitation proceedings, the court may order the conversion of
rehabilitation proceedings to liquidation proceedings pursuant to (a) Section 25(c) of this Act; or (b)
Section 72 of this Act; or (c) Section 75 of this Act; or (d) Section 90 of this Act; or at any other time
upon the recommendation of the rehabilitation receiver that the rehabilitation of the debtor is not feasible.
Thereupon, the court shall issue the Liquidation Order mentioned in Section 112 hereof.

Section 93. Powers of the Securities and Exchange Commission (SEC). - The provisions of this chapter
shall not affect the regulatory powers of the SEC under Section 6 of Presidential Decree No. 902-A, as
amended, with respect to any dissolution and liquidation proceeding initiated and heard before it.

CHAPTER VI
INSOLVENCY OF INDIVIDUAL DEBTORS

(A) Suspension of Payments.

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

298
Section 95. Action on the Petition. - If the court finds the petition sufficient in form and substance, it
shall, within five (5) working days from the filing of the petition, issue an Order:

(a) calling a meeting of all the creditors named in the schedule of debts and liabilities at such time
not less than fifteen (15) days nor more than forty (40) days from the date of such Order and
designating the date, time and place of the meeting;

(b) directing such creditors to prepare and present written evidence of their claims before the
scheduled creditors' meeting;

(c) directing the publication of the said order in a newspaper of general circulation published in
the province or city in which the petition is filed once a week for two (2) consecutive weeks, with
the first publication to be made within seven (7) days from the time of the issuance of the Order;

(d) directing the clerk of court to cause the sending of a copy of the Order by registered mail,
postage prepaid, to all creditors named in the schedule of debts and liabilities;

(e) forbidding the individual debtor from selling, transferring, encumbering or disposing in any
manner of his property, except those used in the ordinary operations of commerce or of industry
in which the petitioning individual debtor is engaged so long as the proceedings relative to the
suspension of payments are pending;

(f) prohibiting the individual debtor from making any payment outside of the necessary or
legitimate expenses of his business or industry, so long as the proceedings relative to the
suspension of payments are pending; and

(g) appointing a commissioner to preside over the creditors' meeting.

Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the court may issue an order
suspending any pending execution against the individual debtor. Provide, That properties held as security
by secured creditors shall not be the subject of such suspension order. The suspension order shall lapse
when three (3) months shall have passed without the proposed agreement being accepted by the creditors
or as soon as such agreement is denied.

No creditor shall sue or institute proceedings to collect his claim from the debtor from the time of the
filing of the petition for suspension of payments and for as long as proceedings remain pending except:

(a) those creditors having claims for personal labor, maintenance, expense of last illness and
funeral of the wife or children of the debtor incurred in the sixty (60) days immediately prior to
the filing of the petition; and

(b) secured creditors.

Section 97. Creditors' Meeting. - The presence of creditors holding claims amounting to at least three-
fifths (3/5) of the liabilities shall be necessary for holding a meeting. The commissioner appointed by the
court shall preside over the meeting and the clerk of court shall act as the secretary thereof, subject to the
following rules:

(a) The clerk shall record the creditors present and amount of their respective claims;

299
 (b) The commissioner shall examine the written evidence of the claims. If the creditors present
hold at least three-fifths (3/5) of the liabilities of the individual debtor, the commissioner shall
declare the meeting open for business;

(c) The creditors and individual debtor shall discuss the propositions in the proposed agreement
and put them to a vote;

(d) To form a majority, it is necessary:

(1) that two-thirds (2/3) of the creditors voting unite upon the same proposition; and

(2) that the claims represented by said majority vote amount to at least three-fifths (3/5)
of the total liabilities of the debtor mentioned in the petition; and

(e) After the result of the voting has been announced, all protests made against the majority vote
shall be drawn up, and the commissioner and the individual debtor together with all creditors
taking part in the voting shall sign the affirmed propositions.

No creditor who incurred his credit within ninety (90) days prior to the filing of the petition shall be
entitled to vote.

Section 98. Persons Who May Refrain From Voting. - Creditors who are unaffected by the Suspension
Order may refrain from attending the meeting and from voting therein. Such persons shall not be bound
by any agreement determined upon at such meeting, but if they should join in the voting they shall be
bound in the same manner as are the other creditors.

Section 99. Rejection of the Proposed Agreement. - The proposed agreement shall be deemed rejected if
the number of creditors required for holding a meeting do not attend thereat, or if the two (2) majorities
mentioned in Section 97 hereof are not in favor thereof. In such instances, the proceeding shall be
terminated without recourse and the parties concerned shall be at liberty to enforce the rights which may
correspond to them.

Section 100. Objections. - If the proposal of the individual debtor, or any amendment thereof made
during the creditors' meeting, is approved by the majority of creditors in accordance with Section 97
hereof, any creditor who attended the meeting and who dissented from and protested against the vote of
the majority may file an objection with the court within ten (10) days from the date of the last creditors'
meeting. The causes for which objection may be made to the decision made by the majority during the
meeting shall be: (a) defects in the call for the meeting, in the holding thereof and in the deliberations had
thereat which prejudice the rights of the creditors; (b) fraudulent connivance between one or more
creditors and the individual debtor to vote in favor of the proposed agreement; or (c) fraudulent
conveyance of claims for the purpose of obtaining a majority. The court shall hear and pass upon such
objection as soon as possible and in a summary manner.

In case the decision of the majority of creditors to approve the individual debtor's proposal or any
amendment thereof made during the creditors' meeting is annulled by the court, the court shall declare the
proceedings terminated and the creditors shall be at liberty to exercise the rights which may correspond to
them.

Section 101. Effects of Approval of Proposed Agreement. - If the decision of the majority of the creditors
to approve the proposed agreement or any amendment thereof made during the creditors' meeting is

300
uphold by the court, or when no opposition or objection to said decision has been presented, the court
shall order that the agreement be carried out and all parties bound thereby to comply with its terms.

The court may also issue all orders which may be necessary or proper to enforce the agreement on motion
of any affected party. The Order confirming the approval of the proposed agreement or any amendment
thereof made during the creditors' meeting shall be binding upon all creditors whose claims are included
in the schedule of debts and liabilities submitted by the individual debtor and who were properly
summoned, but not upon: (a) those creditors having claims for personal labor, maintenance, expenses of
last illness and funeral of the wife or children of the debtor incurred in the sixty (60) days immediately
prior to the filing of the petition; and (b) secured creditors who failed to attend the meeting or refrained
from voting therein.

Section 102. Failure of Individual Debtor to Perform Agreement. - If the individual debtor fails, wholly
or in part, to perform the agreement decided upon at the meeting of the creditors, all the rights which the
creditors had against the individual debtor before the agreement shall revest in them. In such case the
individual debtor may be made subject to the insolvency proceedings in the manner established by this
Act.

(B) Voluntary Liquidation.

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

Section 104. Liquidation Order. - If the court finds the petition sufficient in form and substance it shall,
within five (5) working days issue the Liquidation Order mentioned in Section 112 hereof.

(C) In voluntary Liquidation.

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

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

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

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

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

301
 (d) That he conceals, or is removing, any of his property to avoid its being attached or taken on
legal process;

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

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

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

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

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

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

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

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

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

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

Section 106. Order to Individual Debtor to Show Cause. - Upon the filing of such creditors' petition, the
court shall issue an Order requiring the individual debtor to show cause, at a time and place to be fixed by
the said court, why he should not be adjudged an insolvent. Upon good cause shown, the court may issue
an Order forbidding the individual debtor from making payments of any of his debts, and transferring any
property belonging to him. However, nothing contained herein shall affect or impair the rights of a
secured creditor to enforce his lien in accordance with its terms.

Section 107. Default. - If the individual debtor shall default or if, after trial, the issues are found in favor
of the petitioning creditors the court shall issue the Liquidation Order mentioned in Section 112 hereof.

Section 108. Absent Individual Debtor. - In all cases where the individual debtor resides out of the
Republic of the Philippines; or has departed therefrom; or cannot, after due diligence, be found therein; or
conceals himself to avoid service of the Order to show cause, or any other preliminary process or orders

302
in the matter, then the petitioning creditors, upon submitting the affidavits requisite to procedure an Order
of publication, and presenting a bond in double the amount of the aggregate sum of their claims against
the individual debtor, shall be entitled to an Order of the court directing the sheriff of the province or city
in which the matter is pending to take into his custody a sufficient amount of property of the individual
debtor to satisfy the demands of the petitioning creditors and the costs of the proceedings. Upon receiving
such Order of the court to take into custody of the property of the individual debtor, it shall be the duty of
the sheriff to take possession of the property and effects of the individual debtor, not exempt from
execution, to an extent sufficient to cover the amount provided for and to prepare within three (3) days
from the time of taking such possession, a complete inventory of all the property so taken, and to return it
to the court as soon as completed. The time for taking the inventory and making return thereof may be
extended for good cause shown to the court. The sheriff shall also prepare a schedule of the names and
residences of the creditors, and the amount due each, from the books of the debtor, or from such other
papers or data of the individual debtor available as may come to his possession, and shall file such
schedule or list of creditors and inventory with the clerk of court.

Section 109. All Property Taken to be Held for All Creditors; Appeal Bonds; Exemptions to Sureties. - In
all cases where property is taken into custody by the sheriff, if it does not embrace all the property and
effects of the debtor not exempt from execution, any other creditor or creditors of the individual debtor,
upon giving bond to be approved by the court in double the amount of their claims, singly or jointly, shall
be entitled to similar orders and to like action, by the sheriff; until all claims be provided for, if there be
sufficient property or effects. All property taken into custody by the sheriff by virtue of the giving of any
such bonds shall be held by him for the benefit of all creditors of the individual debtor whose claims shall
be duly proved as provided in this Act. The bonds provided for in this section and the preceding section to
procure the order for custody of the property and effects of the individual debtor shall be conditioned that
if, upon final hearing of the petition in insolvency, the court shall find in favor of the petitioners, such
bonds and all of them shall be void; if the decision be in favor of the individual debtor, the proceedings
shall be dismissed, and the individual debtor, his heirs, administrators, executors or assigns shall be
entitled to recover such sum of money as shall be sufficient to cover the damages sustained by him, not to
exceed the amount of the respective bonds. Such damages shall be fixed and allowed by the court. If
either the petitioners or the debtor shall appeal from the decision of the court, upon final hearing of the
petition, the appellant shall be required to give bond to the successful party in a sum double the amount of
the value of the property in controversy, and for the costs of the proceedings.

Any person interested in the estate may take exception to the sufficiency of the sureties on such bond or
bonds. When excepted to the petitioner's sureties, upon notice to the person excepting of not less than two
(2) nor more than five (5) days, must justify as to their sufficiency; and upon failure to justify, or of others
in their place fail to justify at the time and place appointed the judge shall issue an Order vacating the
order to take the property of the individual debtor into the custody of the sheriff, or denying the appeal, as
the case may be.

Section 110. Sale Under Execution. - If, in any case, proper affidavits and bonds are presented to the
court or a judge thereof, asking for and obtaining an Order of publication and an Order for the custody of
the property of the individual debtor and thereafter the petitioners shall make it appear satisfactorily to the
court or a judge thereof that the interest of the parties to the proceedings will be subserved by a sale
thereof, the court may order such property to be sold in the same manner as property is sold under
execution, the proceeds to de deposited in the court to abide by the result of the proceedings.

CHAPTER VII
PROVISIONS COMMON TO LIQUIDATION IN INSOLVENCY OF INDIVIDUAL AND
JURIDICAL DEBTORS

303
Section 111. Use of Term Debtor. - For purposes of this chapter, the term debtor shall include both
individual debtor as defined in Section 4(o) and debtor as defined in Section 4(k) of this Act.

(A) The Liquidation Order.

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

(a) declare the debtor insolvent;

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

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

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

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

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

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

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

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

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

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

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

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

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

(d) no separate action for the collection of an unsecured claim shall be allowed. Such actions
already pending will be transferred to the Liquidator for him to accept and settle or contest. If the

304
 liquidator contests or disputes the claim, the court shall allow, hear and resolve such contest
except when the case is already on appeal. In such a case, the suit may proceed to judgment, and
any final and executor judgment therein for a claim against the debtor shall be filed and allowed
in court; and

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

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

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

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

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

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

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

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

(B) The Liquidator.

Section 115. Election of Liquidator. - Only creditors who have filed their claims within the period set by
the court, and whose claims are not barred by the statute of limitations, will be allowed to vote in the
election of the liquidator. A secured creditor will not be allowed to vote, unless: (a) he waives his security
or lien; or (b) has the value of the property subject of his security or lien fixed by agreement with the
liquidator, and is admitted for the balance of his claim.

The creditors entitled to vote will elect the liquidator in open court. The nominee receiving the highest
number of votes cast in terms of amount of claims, ad who is qualified pursuant to Section 118 hereof,
shall be appointed as the liquidator.

Section 116. Court-Appointed Liquidator. - The court may appoint the liquidator if:

(a) on the date set for the election of the liquidator, the creditors do not attend;

(b) the creditors who attend, fail or refuse to elect a liquidator;

(c) after being elected, the liquidator fails to qualify; or

305
 (d) a vacancy occurs for any reason whatsoever, In any of the cases provided herein, the court
may instead set another hearing of the election of the liquidator.

Provided further, That nothing in this section shall be construed to prevent a rehabilitation receiver, who
was administering the debtor prior to the commencement of the liquidation, from being appointed as a
liquidator.

Section 117. Oath and Bond of the Liquidator. -Prior to entering upon his powers, duties and
responsibilities, the liquidator shall take an oath and file a bond, In such amount to be fixed by the court,
conditioned upon the proper and faithful discharge of his powers, duties and responsibilities.

Section 118. Qualifications of the Liquidator. - The liquidator shall have the qualifications enumerated in
Section 29 hereof. He may be removed at any time by the court for cause, either motu propio or upon
motion of any creditor entitled to vote for the election of the liquidator.

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

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

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

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

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

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

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

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

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

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

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

306
Section 120. Compensation of the Liquidator. - The liquidator and the persons and entities engaged or
employed by him to assist in the discharge of his powers and duties shall be entitled to such reasonable
compensation as may determined by the liquidation court, which shall not exceed the maximum amount
as may be prescribed by the Supreme Court.

Section 121. Reporting Requiremen5ts. - The liquidator shall make and keep a record of all moneys
received and all disbursements mad by him or under his authority as liquidator. He shall render a
quarterly report thereof to the court , which report shall be made available to all interested parties. The
liquidator shall also submit such reports as may be required by the court from time to time as well as a
final report at the end of the liquidation proceedings.

Section 122. Discharge of Liquidator. - In preparation for the final settlement of all the claims against the
debtor , the liquidator will notify all the creditors, either by publication in a newspaper of general
circulation or such other mode as the court may direct or allow, that will apply with the court for the
settlement of his account and his discharge from liability as liquidator. The liquidator will file a final
accounting with the court, with proof of notice to all creditors. The accounting will be set for hearing. If
the court finds the same in order, the court will discharge the liquidator.

(C) Determination of Claims

Section 123. Registry of Claims. - Within twenty (20) days from his assumption into office the liquidator
shall prepare a preliminary registry of claims of secured and unsecured creditors. Secured creditors who
have waived their security or lien, or have fixed the value of the property subject of their security or lien
by agreement with the liquidator and is admitted as a creditor for the balance , shall be considered as
unsecured creditors. The liquidator shall make the registry available for public inspection and provide
publication notice to creditors, individual debtors owner/s of the sole proprietorship-debtor, the partners
of the partnership-debtor and shareholders or members of the corporation-debtor, on where and when they
may inspect it. All claims must be duly proven before being paid.

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

Section 125. - Opposition or Challenge to Claims. - Within thirty (30 ) days from the expiration of the
period for filing of applications for recognition of claims, creditors, individual debtors, owner/s of the sole
proprietorship-debtor, partners of the partnership-debtor and shareholders or members of the corporation -
debtor and other interested parties may submit a challenge to claim or claims to the court, serving a
certified copy on the liquidator and the creditor holding the challenged claim. Upon the expiration of the
(30) day period, the rehabilitation receiver shall submit to the court the registry of claims containing the
undisputed claims that have not been subject to challenge. Such claims shall become final upon the filling
of the register and may be subsequently set aside only on grounds or fraud, accident, mistake or
inexcusable neglect.

Section 126. Submission of Disputed to the Court. - The liquidator shall resolve disputed claims and
submit his findings thereon to the court for final approval. The liquidator may disallow claims.

(D) Avoidance Proceedings.

Section 127. Rescission or Nullity of Certain Transactions. - Any transaction occurring prior to the
issuance of the Liquidation Order or, in case of the conversion of the rehabilitation proceedings prior to

307
the commencement date, entered into by the debtor or involving its assets, may be rescinded or declared
null and void on the ground that the same was executed with intent to defraud a creditor or creditors or
which constitute undue preference of creditors. The presumptions set forth in Section 58 hereof shall
apply.

Section 128. Actions for Rescission or Nullity. - (a) The liquidator or, with his conformity, a creditor may
initiate and prosecute any action to rescind, or declare null and void any transaction described in the
immediately preceding paragraph. If the liquidator does not consent to the filling or prosecution of such
action, any creditor may seek leave of the court to commence said action.

(b) if leave of court is granted under subsection (a) hereof, the liquidator shall assign and transfer
to the creditor all rights, title and interest in the chose in action or subject matter of the
proceeding, including any document in support thereof.

(c) Any benefit derived from a proceeding taken pursuant to subsection (a) hereof, to the extent of
his claim and the costs, belongs exclusively to the creditor instituting the proceeding, and the
surplus, if any, belongs to the estate.

(d) Where, before an orders is made under subsection (a) hereof, the liquidator signifies to the
court his readiness to the institute the proceeding for the benefit of the creditors, the order shall
fix the time within which he shall do so and, in that case the benefit derived from the proceedings,
if instituted within the time limits so fixed, belongs to the estate.

(E) The Liquidation Plan.

Section 129. The Liquidation Plan. - Within three (3) months from his assumption into office, the
Liquidator shall submit a Liquidation Plan to the court. The Liquidation Plan shall, as a minimum
enumerate all the assets of the debtor and a schedule of liquidation of the assets and payment of the
claims.

Section 130. Exempt Property to be Set Apart. - It shall be the duty of the court, upon petition and after
hearing, to exempt and set apart, for the use and benefit of the said insolvent, such real and personal
property as is by law exempt from execution, and also a homestead; but no such petition shall be heard as
aforesaid until it is first proved that notice of the hearing of the application therefor has been duly given
by the clerk, by causing such notice to be posted it at least three (3) public places in the province or city at
least ten (10) days prior to the time of such hearing, which notice shall set forth the name of the said
insolvent debtor, and the time and place appointed for the hearing of such application, and shall briefly
indicate the homestead sought to be exempted or the property sought to be set aside; and the decree must
show that such proof was made to the satisfaction of the court, and shall be conclusive evidence of that
fact.

Section 131. Sale of Assets in Liquidation. - The liquidator may sell the unencumbered assets of the
debtor and convert the same into money. The sale shall be made at public auction. However, a private sale
may be allowed with the approval of the court if; (a) the goods to be sold are of a perishable nature, or are
liable to quickly deteriorate in value, or are disproportionately expensive to keep or maintain; or (b) the
private sale is for the best interest of the debtor and his creditors.

With the approval of the court, unencumbered property of the debtor may also be conveyed to a creditor
in satisfaction of his claim or part thereof.

308
Section 132. manner of Implementing the Liquidation Plan. - The Liquidator shall implement the
Liquidation Plan as approved by the court. Payments shall be made to the creditors only in accordance
with the provisions of the Plan.

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

Section 134. Order Removing the Debtor from the List of Registered Entitles at the Securities and
Exchange Commission. - Upon determining that the liquidation has been completed according to this Act
and applicable law, the court shall issue an Order approving the report and ordering the SEC to remove
the debtor from the registry of legal entities.

Section 135. Termination of Proceedings. - Upon receipt of evidence showing that the debtor has been
removed from the registry of legal entities at the SEC. The court shall issue an Order terminating the
proceedings.

(F) Liquidation of a Securities Market Participant.

Section 136. Liquidation of a Securities Market Participant. - The foregoing provisions of this chapter
shall be without prejudice to the power of a regulatory agency or self- regulatory organization to liquidate
trade-related claims of clients or customers of a securities market participant which, for purposes of
investor protection, are hereby deemed to have absolute priority over other claims of whatever nature or
kind insofar as trade-related assets are concerned.

For purposes of this section, trade -related assets include cash, securities, trading right and other owned
and used by the securities market participant in the ordinary course of this business.

CHAPTER VIII
PROCEEDINGS ANCILLARY TO OTHER INSOLVENCY OR REHABILITAION
PROCEEDINGS

(A) Banks and Other Financial Institutions Under Rehabilitation Receivership Pursuant to a State-
funded or State-mandated Insurance System.

Section 137. Provision of Assistance. - The court shall issue orders, adjudicate claims and provide other
relief necessary to assist in the liquidation of a financial under rehabilitation receivership established by a
state-funded or state-mandated insurance system.

Section 138. Application of Relevant Legislation. - The liquidation of bank, financial institutions,
insurance companies and pre-need companies shall be determined by relevant legislation. The provisions
in this Act shall apply in a suppletory manner.

(B) Cross-Border Insolvency Proceedings.

309
Section 139. Adoption of Uncitral Model Law on Cross-Border Insolvency. - Subject to the provision of
Section 136 hereof and the rules of procedure that may be adopted by the Supreme Court, the Model Law
on Cross-Border Insolvency of the United Nations Center for International Trade and Development is
hereby adopted as part of this Act.

Section 140. Initiation of Proceedings. - The court shall set a hearing in connection with an insolvency or
rehabilitation proceeding taking place in a foreign jurisdiction, upon the submission of a petition by the
representative of the foreign entity that is the subject of the foreign proceeding.

Section 141. Provision of Relief. - The court may issue orders:

(a) suspending any action to enforce claims against the entity or otherwise seize or foreclose on
property of the foreign entity located in the Philippines;

(b) requiring the surrender property of the foreign entity to the foreign representative; or

(c) providing other necessary relief.

Section 142. Factors in Granting Relief. - In determining whether to grant relief under this subchapter,
the court shall consider;

(a) the protection of creditors in the Philippines and the inconvenience in pursuing their claim in a
foreign proceeding;

(b) the just treatment of all creditors through resort to a unified insolvency or rehabilitation
proceedings;

(c) whether other jurisdictions have given recognition to the foreign proceeding;

(d) the extent that the foreign proceeding recognizes the rights of creditors and other interested
parties in a manner substantially in accordance with the manner prescribed in this Act; and

(e) the extent that the foreign proceeding has recognized and shown deference to proceedings
under this Act and previous legislation.

CHAPTER IX
FUNDS FOR REHABILITATION OF GOVERNMENT-OWNED AND CONTROLLED
CORPORATIONS

Section 143. Funds for Rehabilitation of Government -owned and Controlled Corporations. - Public
funds for the rehabilitation of government-owned and controlled corporations shall be released only
pursuant to an appropriation by Congress and shall be supported by funds actually available as certified
by the National Treasurer.

The Department of Finance, in collaboration with the Department of Budget and Management, shall
promulgate the rules for the use and release of said funds.

CHAPTER X
MISCELLANEOUS PROVISIOS

310
Section 144. Applicability of Provisions. - The provisions in Chapter II, insofar as they are applicable,
shall likewise apply to proceedings in Chapters II and IV.

Section 145. Penalties. - An owner, partner, director, officer or other employee of the debtor who
commits any one of the following acts shall, upon conviction thereof, be punished by a fine of not more
than One million pesos (Php 1, 000,000.00) and imprisonment for not less than three(3) months nor more
than five (5) years for each offense;

(a) if he shall, having notice of the commencement of the proceedings, or having reason to
believe that proceedings are about to be commented, or in contemplation of the proceedings hide
or conceal, or destroy or cause to be destroyed or hidden any property belonging to the debtor or
if he shall hide, destroy, after mutilate or falsify, or cause to be hidden, destroyed, altered,
mutilated or falsified, any book, deed, document or writing relating thereto; if he shall, with intent
to defraud the creditors of the debtor, make any payment sale, assignment, transfer or conveyance
of any property belongings to the debtor

(b) if he shall, having knowledge belief of any person having proved a false or fictitious claim
against the debtor, fail to disclose the same to the rehabilitation receiver of liquidator within one
(1) month after coming to said knowledge or belief; or if he shall attempt to account for any of
the debtors property by fictitious losses or expense; or

(c) if he shall knowingly violate a prohibition or knowingly fail to undertake an obligation

established by this Act.

Section 146. Application to Pending Insolvency, Suspension of Payments and Rehabilitation Cases. -
This Act shall govern all petitions filed after it has taken effect. All further proceedings in insolvency,
suspension of payments and rehabilitation cases then pending, except to the extent that in opinion of the
court their application would not be feasible or would work injustice, in which event the procedures set
forth in prior laws and regulations shall apply.

Section 147. Application to Pending Contracts. - This Act shall apply to all contracts of the debtor
regardless of the date of perfection.

Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As amended is hereby repealed.
All other laws, orders, rules and regulations or parts thereof inconsistent with any provision of this Act
are hereby repealed or modified accordingly.

Section 149. Separability Clause. - If any provision of this Act shall be held invalid, the remainder of this
Act not otherwise affected shall remain in full force effect

Section 150. Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete publication
in the Official Gazette or in at least two (2) national newspaper of general circulation.

Approved,

(Sgd.) JUAN PONCE ENRILE (Sgd.) PROSPERO C. NOGRALES

President of the Senate Speaker of the House of Representatives

311
This Act which is a consolidation of House Bill No. 7090 and Senate Bill No. 61 was finally passed by
the House of Representatives and the Senate on February 1. 2010 and February 2, 2010, respectively.

(Sgd.) EMMA LIRIO-REYES (Sgd.) MARILYN B. BARUA-YAP

Secretary of Senate Secretary General
House of Representatives

(Sgd.) GLORIA MACAPAGAL-ARROYO

President of the Philippines

Philippine Star - August 16, 2010

312
Republic Act No. 9346 June 24, 2006

AN ACT PROHIBITING THE IMPOSITION OF DEATH PENALTY IN THE PHILIPPINES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. The imposition of the penalty of death is hereby prohibited. Accordingly, Republic Act No.
Eight Thousand One Hundred Seventy-Seven (R.A. No. 8177), otherwise known as the Act Designating
Death by Lethal Injection is hereby repealed. Republic Act No. Seven Thousand Six Hundred Fifty-Nine
(R.A. No. 7659), otherwise known as the Death Penalty Law, and all other laws, executive orders and
decrees, insofar as they impose the death penalty are hereby repealed or amended accordingly.

SEC. 2. In lieu of the death penalty, the following shall be imposed.

(a) the penalty of reclusion perpetua, when the law violated makes use of the nomenclature of the
penalties of the Revised Penal Code; or

(b) the penalty of life imprisonment, when the law violated does not make use of the
nomenclature of the penalties of the Revised Penal Code.

SEC. 3. Person convicted of offenses punished with reclusion perpetua, or whose sentences will be
reduced to reclusion perpetua, by reason of this Act, shall not be eligible for parole under Act No. 4180,
otherwise known as the Indeterminate Sentence Law, as amended.

SEC. 4. The Board of Pardons and Parole shall cause the publication at least one a week for three
consecutive weeks in a newspaper of general circulation of the names of persons convicted of offenses
punished with reclusion perpetua or life imprisonment by reason of this Act who are being considered or
recommend for commutation or pardon; Provided, however, That nothing herein shall limit the power of
the President to grant executive clemency under Section 19, Article VII of the Constitutions.

SEC. 5. This Act shall take effect immediately after its publication in two national newspapers of general
circulation.

Approved,

FRANKLIN DRILON JOSE DE VENECIA JR.

President of the Senate Speaker of the House of
Representatives

This Act which is a consolidation of Senate Bill No. 2254 and House Bill No. 4826 was finally passed bu
the Senate and the House of Representative on July 7, 2006.

OSCAR G. YABES ROBERTO P. NAZARENO

Secretary of Senate Secretary General
House of Represenatives

Approved: June 24, 2006

313
GLORIA MACAPAGAL-ARROYO
President of the Philippines

314
ACT NO. 4103
(As Amended by Act No. 4225 and Republic Act No. 4203 [June 19, 1965])

AN ACT TO PROVIDE FOR AN INDETERMINATE SENTENCE AND PAROLE FOR ALL

PERSONS CONVICTED OF CERTAIN CRIMES BY THE COURTS OF THE PHILIPPINE
ISLANDS; TO CREATE A BOARD OF INDETERMINATE SENTENCE AND TO PROVIDE FUNDS
THEREFOR; AND FOR OTHER PURPOSES.

Section 1. Hereafter, in imposing a prison sentence for an offense punished by the Revised Penal Code, or
its amendments, the court shall sentence the accused to an indeterminate sentence the maximum term of
which shall be that which, in view of the attending circumstances, could be properly imposed under the
rules of the said Code, and the minimum which shall be within the range of the penalty next lower to that
prescribed by the Code for the offense; and if the offense is punished by any other law, the court shall
sentence the accused to an indeterminate sentence, the maximum term of which shall not exceed the
maximum fixed by said law and the minimum shall not be less than the minimum term prescribed by the
same.

Sec. 2. This Act shall not apply to persons convicted of offenses punished with death penalty or life-
imprisonment; to those convicted of treason, conspiracy or proposal to commit treason; to those convicted
of misprision of treason, rebellion, sedition or espionage; to those convicted of piracy; to those who are
habitual delinquents; to those who have escaped from confinement or evaded sentence; to those who
having been granted conditional pardon by the Chief Executive shall have violated the terms thereof; to
those whose maximum term of imprisonment does not exceed one year, not to those already sentenced by
final judgment at the time of approval of this Act, except as provided in Section 5 hereof.
.
Sec. 3. There is hereby created a Board of Pardons and Parole to be composed of the Secretary of Justice
who shall be its Chairman, and four members to be appointed by the President, with the consent of the
Commission on Appointments who shall hold office for a term of six years: Provided, That one member
of the board shall be a trained sociologist, one a clergyman or educator, one psychiatrist unless a trained
psychiatrist be employed by the board, and the other members shall be persons qualified for such work by
training and experience. At least one member of the board shall be a woman. Of the members of the
present board, two shall be designated by the President to continue until December thirty, nineteen
hundred and sixty-six and the other two shall continue until December thirty, nineteen hundred and sixty-
nine. In case of any vacancy in the membership of the Board, a successor may be appointed to serve only
for the unexpired portion of the term of the respective members.

Sec. 4. The Board of Pardons and Parole is authorized to adopt such rules and regulations as may be
necessary for carrying out its functions and duties. The Board is empowered to call upon any bureau,
office, branch, subdivision, agency or instrumentality of the Government for such assistance as it may
need in connection with the performance of its functions. A majority of all the members shall constitute a
quorum and a majority vote shall be necessary to arrive at a decision. Any dissent from the majority
opinion shall be reduced to writing and filed with the records of the proceedings. Each member of the
Board, including the Chairman and the Executive Officer, shall be entitled to receive as compensation
fifty pesos for each meeting actually attended by him, notwithstanding the provisions of Section two
hundred and fifty-nine of the Revised Administrative Code, and in addition thereto, reimbursement of
actual and necessary traveling expenses incurred in the performance of duties: Provided, however, That
the Board meetings will not be more than three times a week.
Sec. 5. It shall be the duty of the Board of Indeterminate Sentence to look into the physical, mental and
moral record of the prisoners who shall be eligible to parole and to determine the proper time of release of
such prisoners. Whenever any prisoner shall have served the minimum penalty imposed on him, and it

315
shall appear to the Board of Indeterminate Sentence, from the reports of the prisoner's work and conduct
which may be received in accordance with the rules and regulations prescribed, and from the study and
investigation made by the Board itself, that such prisoner is fitted by his training for release, that there is a
reasonable probability that such prisoner will live and remain at liberty without violating the law, and that
such release will not be incompatible with the welfare of society, said Board of Indeterminate Sentence
may, in its discretion, and in accordance with the rules and regulations adopted hereunder, authorize the
release of such prisoner on parole, upon such terms and conditions as are herein prescribed and as may be
prescribed by the Board. The said Board of Indeterminate Sentence shall also examine the records and
status of prisoners who shall have been convicted of any offense other than those named in Section 2
hereof, and have been sentenced for more than one year by final judgment prior to the date on which this
Act shall take effect, and shall make recommendation in all such cases to the Governor-General with
regard to the parole of such prisoners as they shall deem qualified for parole as herein provided, after they
shall have served a period of imprisonment not less than the minimum period for which they might have
been sentenced under this Act for the same offense.

Sec. 6. Every prisoner released from confinement on parole by virtue of this Act shall, at such times and
in such manner as may be required by the conditions of his parole, as may be designated by the said
Board for such purpose, report personally to such government officials or other parole officers hereafter
appointed by the Board of Indeterminate Sentence for a period of surveillance equivalent to the remaining
portion of the maximum sentence imposed upon him or until final release and discharge by the Board of
Indeterminate Sentence as herein provided. The officials so designated shall keep such records and make
such reports and perform such other duties hereunder as may be required by said Board. The limits of
residence of such paroled prisoner during his parole may be fixed and from time to time changed by the
said Board in its discretion. If during the period of surveillance such paroled prisoner shall show himself
to be a law-abiding citizen and shall not violate any of the laws of the Philippine Islands, the Board of
Indeterminate Sentence may issue a final certificate of release in his favor, which shall entitle him to final
release and discharge.

Sec. 7. The Board shall file with the court which passed judgment on the case, and with the Chief of
Constabulary, a certified copy of each order of conditional or final release and discharge issued in
accordance with the provisions of the next preceding two sections.
Sec. 8. Whenever any prisoner released on parole by virtue of this Act shall, during the period of
surveillance, violate any of the conditions of his parole, the Board of Indeterminate Sentence may issue an
order for his re-arrest which may be served in any part of the Philippine Islands by any police officer. In
such case the prisoner so re-arrested shall serve the remaining unexpired portion of the maximum
sentence for which he was originally committed to prison, unless the Board of Indeterminate Sentence
shall, in its discretion, grant a new parole to the said prisoner. chan robles virtual law library

Sec. 9. Nothing in this Act shall be construed to impair or interfere with the powers of the Governor-
General as set forth in Section 64(i) of the Revised Administrative Code or the Act of Congress approved
August 29, 1916 entitled "An Act to declare the purpose of the people of the United States as to the future
political status of the people of the Philippine Islands, and to provide a more autonomous government for
those Islands."
Sec. 10. Whenever any prisoner shall be released on parole hereunder he shall be entitled to receive the
benefits provided in Section 1751 of the Revised Administrative Code. chan robles virtual law library

Approved:chanroblesvirtuallawlibrary December 5, 1933.

316
 MALACAANG
Manila

PRESIDENTIAL DECREE No. 968 July 24, 1976

ESTABLISHING A PROBATION SYSTEM, APPROPRIATING FUNDS THEREFOR AND FOR

OTHER PURPOSES

WHEREAS, one of the major goals of the government is to establish a more enlightened and humane
correctional systems that will promote the reformation of offenders and thereby reduce the incidence of
recidivism;

WHEREAS, the confinement of all offenders prisons and other institutions with rehabilitation programs
constitutes an onerous drain on the financial resources of the country; and

WHEREAS, there is a need to provide a less costly alternative to the imprisonment of offenders who are
likely to respond to individualized, community-based treatment programs;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution, do hereby order and decree the following:

Section 1. Title and Scope of the Decree. This Decree shall be known as the Probation Law of 1976. It
shall apply to all offenders except those entitled to the benefits under the provisions of Presidential
Decree numbered Six Hundred and three and similar laws.

Section 2. Purpose. This Decree shall be interpreted so as to:

(a) promote the correction and rehabilitation of an offender by providing him with individualized
treatment;

(b) provide an opportunity for the reformation of a penitent offender which might be less
probable if he were to serve a prison sentence; and

(c) prevent the commission of offenses.

Section 3. Meaning of Terms. As used in this Decree, the following shall, unless the context otherwise
requires, be construed thus:

(a) "Probation" is a disposition under which a defendant, after conviction and sentence, is
released subject to conditions imposed by the court and to the supervision of a probation officer.

(b) "Probationer" means a person placed on probation.

(c) "Probation Officer" means one who investigates for the court a referral for probation or
supervises a probationer or both.

Section 4. Grant of Probation. Subject to the provisions of this Decree, the court may, after it shall have
convicted and sentenced a defendant and upon application at any time of said defendant, suspend the

317
execution of said sentence and place the defendant on probation for such period and upon such terms and
conditions as it may deem best.

Probation may be granted whether the sentence imposes a term of imprisonment or a fine only. An
application for probation shall be filed with the trial court, with notice to the appellate court if an appeal
has been taken from the sentence of conviction. The filing of the application shall be deemed a waver of
the right to appeal, or the automatic withdrawal of a pending appeal.

An order granting or denying probation shall not be appealable.

Section 5. Post-sentence Investigation. No person shall be placed on probation except upon prior
investigation by the probation officer and a determination by the court that the ends of justice and the best
interest of the public as well as that of the defendant will be served thereby.

Section 6. Form of Investigation Report. The investigation report to be submitted by the probation officer
under Section 5 hereof shall be in the form prescribed by the Probation Administrator and approved by
the Secretary of Justice.

Section 7. Period for Submission of Investigation Report. The probation officer shall submit to the court
the investigation report on a defendant not later than sixty days from receipt of the order of said court to
conduct the investigation. The court shall resolve the petition for probation not later than five days after
receipt of said report.

Pending submission of the investigation report and the resolution of the petition, the defendant may be
allowed on temporary liberty under his bail filed in the criminal case; Provided, That, in case where no
bail was filed or that the defendant is incapable of filing one, the court may allow the release of the
defendant on recognize the custody of a responsible member of the community who shall guarantee his
appearance whenever required by the court.

Section 8. Criteria for Placing an Offender on Probation. In determining whether an offender may be
placed on probation, the court shall consider all information relative, to the character, antecedents,
environment, mental and physical condition of the offender, and available institutional and community
resources. Probation shall be denied if the court finds that:

(a) the offender is in need of correctional treatment that can be provided most effectively by his
commitment to an institution; or

(b) there is undue risk that during the period of probation the offender will commit another crime;
or

(c) probation will depreciate the seriousness of the offense committed.

Section 9. Disqualified Offenders. The benefits of this Decree shall not be extended to those:

(a) sentenced to serve a maximum term of imprisonment of more than six years;

(b) convicted of any offense against the security of the State;

318
 (c) who have previously been convicted by final judgment of an offense punished by
imprisonment of not less than one month and one day and/or a fine of not less than Two Hundred
Pesos;

(d) who have been once on probation under the provisions of this Decree; and

(e) who are already serving sentence at the time the substantive provisions of this Decree became
applicable pursuant to Section 33 hereof.

Section 10. Conditions of Probation. Every probation order issued by the court shall contain conditions
requiring that the probationer shall:

(a) present himself to the probation officer designated to undertake his supervision at such place
as may be specified in the order within seventy-two hours from receipt of said order;

(b) report to the probation officer at least once a month at such time and place as specified by said
officer.

The court may also require the probationer to:

(a) cooperate with a program of supervision;

(b) meet his family responsibilities;

(c) devote himself to a specific employment and not to change said employment without the prior
written approval of the probation officer;

(d) undergo medical, psychological or psychiatric examination and treatment and enter and
remain in a specified institution, when required for that purpose;

(e) pursue a prescribed secular study or vocational training;

(f) attend or reside in a facility established for instruction, recreation or residence of persons on
probation;

(g) refrain from visiting houses of ill-repute;

(h) abstain from drinking intoxicating beverages to excess;

(i) permit to probation officer or an authorized social worker to visit his home and place or work;

(j) reside at premises approved by it and not to change his residence without its prior written
approval; or

(k) satisfy any other condition related to the rehabilitation of the defendant and not unduly
restrictive of his liberty or incompatible with his freedom of conscience.

Section 11. Effectivity of Probation Order. A probation order shall take effect upon its issuance, at which
time the court shall inform the offender of the consequences thereof and explain that upon his failure to

319
comply with any of the conditions prescribed in the said order or his commission of another offense, he
shall serve the penalty imposed for the offense under which he was placed on probation.

Section 12. Modification of Condition of Probation. During the period of probation, the court may, upon
application of either the probationer or the probation officer, revise or modify the conditions or period of
probation. The court shall notify either the probationer or the probation officer of the filing such an
application so as to give both parties an opportunity to be heard thereon.

The court shall inform in writing the probation officer and the probationer of any change in the period or
conditions of probation.

Section 13. Control and Supervision of Probationer. The probationer and his probation program shall be
under the control of the court who placed him on probation subject to actual supervision and visitation by
a probation officer.

Whenever a probationer is permitted to reside in a place under the jurisdiction of another court, control
over him shall be transferred to the Executive Judge of the Court of First Instance of that place, and in
such a case, a copy of the probation order, the investigation report and other pertinent records shall be
furnished said Executive Judge. Thereafter, the Executive Judge to whom jurisdiction over the
probationer is transferred shall have the power with respect to him that was previously possessed by the
court which granted the probation.

Section 14. Period of Probation.

(a) The period of probation of a defendant sentenced to a term of imprisonment of not more than
one year shall not exceed two years, and in all other cases, said period shall not exceed six years.

(b) When the sentence imposes a fine only and the offender is made to serve subsidiary
imprisonment in case of insolvency, the period of probation shall not be less than nor to be more
than twice the total number of days of subsidiary imprisonment as computed at the rate
established, in Article thirty-nine of the Revised Penal Code, as amended.

Section 15. Arrest of Probationer; Subsequent Disposition. At any time during probation, the court may
issue a warrant for the arrest of a probationer for violation of any of the conditions of probation. The
probationer, once arrested and detained, shall immediately be brought before the court for a hearing,
which may be informal and summary, of the violation charged. The defendant may be admitted to bail
pending such hearing. In such a case, the provisions regarding release on bail of persons charged with a
crime shall be applicable to probationers arrested under this provision. If the violation is established, the
court may revoke or continue his probation and modify the conditions thereof. If revoked, the court shall
order the probationer to serve the sentence originally imposed. An order revoking the grant of probation
or modifying the terms and conditions thereof shall not be appealable.

Section 16. Termination of Probation. After the period of probation and upon consideration of the report
and recommendation of the probation officer, the court may order the final discharge of the probationer
upon finding that he has fulfilled the terms and conditions of his probation and thereupon the case is
deemed terminated.

The final discharge of the probationer shall operate to restore to him all civil rights lost or suspend as a
result of his conviction and to fully discharge his liability for any fine imposed as to the offense for which
probation was granted.

320
The probationer and the probation officer shall each be furnished with a copy of such order.

Section 17. Confidentiality of Records. The investigation report and the supervision history of a
probationer obtained under this Decree shall be privileged and shall not be disclosed directly or indirectly
to anyone other than the Probation Administration or the court concerned, except that the court, in its
discretion, may permit the probationer of his attorney to inspect the aforementioned documents or parts
thereof whenever the best interest of the probationer make such disclosure desirable or helpful: Provided,
Further, That, any government office or agency engaged in the correction or rehabilitation of offenders
may, if necessary, obtain copies of said documents for its official use from the proper court or the
Administration.

Section 18. The Probation Administration. There is hereby created under the Department of Justice an
agency to be known as the Probation Administration herein referred to as the Administration, which shall
exercise general supervision over all probationers.

The Administration shall have such staff, operating units and personnel as may be necessary for the
proper execution of its functions.

Section 19. Probation Administration. The Administration shall be headed by the Probation
Administrator, hereinafter referred to as the Administrator, who shall be appointed by the President of the
Philippines. He shall hold office during good behavior and shall not be removed except for cause.

The Administrator shall receive an annual salary of at least forty thousand pesos. His powers and duties
shall be to:

(a) act as the executive officer of the Administration;

(b) exercise supervision and control over all probation officers;

(c) make annual reports to the Secretary of Justice, in such form as the latter may prescribe,
concerning the operation, administration and improvement of the probation system;

(d) promulgate, subject to the approval of the Secretary of Justice, the necessary rules relative to
the methods and procedures of the probation process;

(e) recommend to the Secretary of Justice the appointment of the subordinate personnel of his
Administration and other offices established in this Decree; and

(f) generally, perform such duties and exercise such powers as may be necessary or incidental to
achieve the objectives of this Decree.

Section 20. Assistant Probation Administrator. There shall be an Assistant Probation Administrator who
shall assist the Administrator perform such duties as may be assigned to him by the latter and as may be
provided by law. In the absence of the Administrator, he shall act as head of the Administration.

He shall be appointed by the President of the Philippines and shall receive an annual salary of at least
thirty-six thousand pesos.

321
Section 21. Qualifications of the Administrator and Assistant Probation Administrator. To be eligible for
Appointment as Administrator or Assistant Probation Administrator, a person must be at least thirty-five
years of age, holder of a master's degree or its equivalent in either criminology, social work, corrections,
penology, psychology, sociology, public administration, law, police science, police administration, or
related fields, and should have at least five years of supervisory experience, or be a member of the
Philippine Bar with at least seven years of supervisory experience.

Section 22. Regional Office; Regional Probation Officer. The Administration shall have regional offices
organized in accordance with the field service area patterns established under the Integrated
Reorganization Plan.

Such regional offices shall be headed by a Regional Probation Officer who shall be appointed by
President of the Philippines in accordance with the Integrated Reorganization Plan and upon the
recommendation of the Secretary of Justice.

The Regional Probation Officer shall exercise supervision and control over all probation officer within his
jurisdiction and such duties as may assigned to him by the Administrator. He shall have an annual salary
of at least twenty-four thousand pesos.

He shall, whenever necessary, be assisted by an Assistant Regional Probation Officer who shall also be
appointed by the President of the Philippines, upon recommendation of the Secretary of Justice, with an
annual salary of at least twenty thousand pesos.

Section 23. Provincial and City Probation Officers. There shall be at least one probation officer in each
province and city who shall be appointed by the Secretary of Justice upon recommendation of the
Administrator and in accordance with civil service law and rules.

The Provincial or City Probation Officer shall receive an annual salary of at least eighteen thousand four
hundred pesos.

His duties shall be to:

(a) investigate all persons referred to him for investigation by the proper court or the
Administrator;

(b) instruct all probationers under his supervision of that of the probation aide on the terms and
conditions of their probations;

(c) keep himself informed of the conduct and condition of probationers under his charge and use
all suitable methods to bring about an improvement in their conduct and conditions;

(d) maintain a detailed record of his work and submit such written reports as may be required by
the Administration or the court having jurisdiction over the probationer under his supervision;

(e) prepare a list of qualified residents of the province or city where he is assigned who are
willing to act as probation aides;

(f) supervise the training of probation aides and oversee the latter's supervision of probationers;

322
 (g) exercise supervision and control over all field assistants, probation aides and other personnel;
and

(h) perform such duties as may be assigned by the court or the Administration.

Section 24. Miscellaneous Powers of Provincial and City Probation Officers. Provincial or City Probation
Officers shall have the authority within their territorial jurisdiction to administer oaths and
acknowledgments and to take depositions in connection with their duties and functions under this Decree.
They shall also have, with respect to probationers under their care, the powers of police officer.

Section 25. Qualifications of Regional, Assistant Regional, Provincial, and City Probation Officers. No
person shall be appointed Regional or Assistant Regional or Provincial or City Probation Officer unless
he possesses at least a bachelor's degree with a major in social work, sociology, psychology, criminology,
penology, corrections, police science, administration, or related fields and has at least three years of
experience in work requiring any of the abovementioned disciplines, or is a member of the Philippine Bar
with at least three years of supervisory experience.

Whenever practicable, the Provincial or City Probation Officer shall be appointed from among qualified
residents of the province or city where he will be assigned to work.

Section 26. Organization. Within twelve months from the approval of this Decree, the Secretary of
Justice shall organize the administrative structure of the Administration and the other agencies created
herein. During said period, he shall also determine the staffing patterns of the regional, provincial and city
probation offices with the end in view of achieving maximum efficiency and economy in the operations
of the probation system.

Section 27. Field Assistants, Subordinate Personnel, Provincial or City Probation Officers shall be
assisted by such field assistants and subordinate personnel as may be necessary to enable them to carry
out their duties effectively.

Section 28. Probation Aides. To assist the Provincial or City Probation Officers in the supervision of
probationers, the Probation Administrator may appoint citizens of good repute and probity to act as
probation aides.

Probation Aides shall not receive any regular compensation for services except for reasonable travel
allowance. They shall hold office for such period as may be determined by the Probation Administrator.
Their qualifications and maximum case loads shall be provided in the rules promulgated pursuant to this
Decree.

Section 29. Violation of Confidential Nature of Probation Records. The penalty of imprisonment ranging
from six months and one day to six years and a fine ranging from hundred to six thousand pesos shall be
imposed upon any person who violates Section 17 hereof.

Section 30. Appropriations. There is hereby authorized the appropriation of the sum of Six Million Five
Hundred Thousand Pesos or so much as may be necessary, out of any funds in the National Treasury not
otherwise appropriated, to carry out the purposes of this Decree. Thereafter, the amount of at least Ten
Million Five Hundred Thousand Pesos or so much as may be necessary shall be included in the annual
appropriations of the national government.

323
Section 31. Repealing Clause. All provisions of existing laws, orders and regulations contrary to or
inconsistent with this Decree are hereby repealed or modified accordingly.

Section 32. Separability of Provisions. If any part, section or provision of this Decree shall be held
invalid or unconstitutional, no other parts, sections or provisions hereof shall be affected thereby.

Section 33. Effectivity. This Decree shall take effect upon its approval: Provided, However, That, the
application of its substantive provisions concerning the grant of probation shall only take effect twelve
months after the certification by the Secretary of Justice to the Chief Justice of the Supreme Court that the
administrative structure of the Probation Administration and of the other agencies has been organized.

DONE in the City of Manila, this 24th day of July in the year of Our Lord, nineteen hundred and seventy-
six.

324
Republic Act No. 9344

AN ACT ESTABLISHING A COMPREHENSIVE JUVENILE JUSTICE AND WELFARE

SYSTEM, CREATING THE JUVENILE JUSTICE AND WELFARE COUNCIL UNDER THE
DEPARTMENT OF JUSTICE, APPROPRIATING FUNDS THEREFOR AND FOR OTHER
PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

TITLE I
GOVERNING PRINCIPLES

CHAPTER 1
TITLE, POLICY AND DEFINITION OF TERMS

Section 1. Short Title and Scope. - This Act shall be known as the "Juvenile Justice and Welfare Act
of 2006."It shall cover the different stages involving children at risk and children in conflict with the law
from prevention to rehabilitation and reintegration.

SEC. 2. Declaration of State Policy. - The following State policies shall be observed at all times:

(a) The State recognizes the vital role of children and youth in nation building and shall promote
and protect their physical, moral, spiritual, intellectual and social well-being. It shall inculcate in
the youth patriotism and nationalism, and encourage their involvement in public and civic affairs.

(b) The State shall protect the best interests of the child through measures that will ensure the
observance of international standards of child protection, especially those to which the
Philippines is a party. Proceedings before any authority shall be conducted in the best interest of
the child and in a manner which allows the child to participate and to express himself/herself
freely. The participation of children in the program and policy formulation and implementation
related to juvenile justice and welfare shall be ensured by the concerned government agency.

(c) The State likewise recognizes the right of children to assistance, including proper care and
nutrition, and special protection from all forms of neglect, abuse, cruelty and exploitation, and
other conditions prejudicial to their development.

(d) Pursuant to Article 40 of the United Nations Convention on the Rights of the Child, the State
recognizes the right of every child alleged as, accused of, adjudged, or recognized as having
infringed the penal law to be treated in a manner consistent with the promotion of the child's
sense of dignity and worth, taking into account the child's age and desirability of promoting
his/her reintegration. Whenever appropriate and desirable, the State shall adopt measures for
dealing with such children without resorting to judicial proceedings, providing that human rights
and legal safeguards are fully respected. It shall ensure that children are dealt with in a manner
appropriate to their well-being by providing for, among others, a variety of disposition measures
such as care, guidance and supervision orders, counseling, probation, foster care, education and
vocational training programs and other alternatives to institutional care.

(e) The administration of the juvenile justice and welfare system shall take into consideration the
cultural and religious perspectives of the Filipino people, particularly the indigenous peoples and

325
 the Muslims, consistent with the protection of the rights of children belonging to these
communities.

(f) The State shall apply the principles of restorative justice in all its laws, policies and programs
applicable to children in conflict with the law.

SEC. 3. Liberal Construction of this Act. - In case of doubt, the interpretation of any of the provisions of
this Act, including its implementing rules and regulations (IRRs), shall be construed liberally in favor of
the child in conflict with the law.

SEC. 4. Definition of Terms. - The following terms as used in this Act shall be defined as follows:

(a) "Bail" refers to the security given for the release of the person in custody of the law, furnished
by him/her or a bondsman, to guarantee his/her appearance before any court. Bail may be given in
the form of corporate security, property bond, cash deposit, or recognizance.

(b) "Best Interest of the Child" refers to the totality of the circumstances and conditions which are
most congenial to the survival, protection and feelings of security of the child and most
encouraging to the child's physical, psychological and emotional development. It also means the
least detrimental available alternative for safeguarding the growth and development of the child.

(e) "Child" refers to a person under the age of eighteen (18) years.

(d) "Child at Risk" refers to a child who is vulnerable to and at the risk of committing criminal
offenses because of personal, family and social circumstances, such as, but not limited to, the
following:

(1) being abused by any person through sexual, physical, psychological, mental,
economic or any other means and the parents or guardian refuse, are unwilling, or unable
to provide protection for the child;

(2) being exploited including sexually or economically;

(3) being abandoned or neglected, and after diligent search and inquiry, the parent or
guardian cannot be found;

(4) coming from a dysfunctional or broken family or without a parent or guardian;

(5) being out of school;

(6) being a streetchild;

(7) being a member of a gang;

(8) living in a community with a high level of criminality or drug abuse; and

(9) living in situations of armed conflict.

326
(e) "Child in Conflict with the Law" refers to a child who is alleged as, accused of, or adjudged
as, having committed an offense under Philippine laws.

(f) "Community-based Programs" refers to the programs provided in a community setting

developed for purposes of intervention and diversion, as well as rehabilitation of the child in
conflict with the law, for reintegration into his/her family and/or community.

(g) "Court" refers to a family court or, in places where there are no family courts, any regional
trial court.

(h) "Deprivation of Liberty" refers to any form of detention or imprisonment, or to the placement
of a child in conflict with the law in a public or private custodial setting, from which the child in
conflict with the law is not permitted to leave at will by order of any judicial or administrative
authority.

(i) "Diversion" refers to an alternative, child-appropriate process of determining the responsibility

and treatment of a child in conflict with the law on the basis of his/her social, cultural, economic,
psychological or educational background without resorting to formal court proceedings.

(j) "Diversion Program" refers to the program that the child in conflict with the law is required to
undergo after he/she is found responsible for an offense without resorting to formal court
proceedings.

(k) "Initial Contact With-the Child" refers to the apprehension or taking into custody of a child in
conflict with the law by law enforcement officers or private citizens. It includes the time when the
child alleged to be in conflict with the law receives a subpoena under Section 3(b) of Rule 112 of
the Revised Rules of Criminal Procedure or summons under Section 6(a) or Section 9(b) of the
same Rule in cases that do not require preliminary investigation or where there is no necessity to
place the child alleged to be in conflict with the law under immediate custody.

(I) "Intervention" refers to a series of activities which are designed to address issues that caused
the child to commit an offense. It may take the form of an individualized treatment program
which may include counseling, skills training, education, and other activities that will enhance
his/her psychological, emotional and psycho-social well-being.

(m) "Juvenile Justice and Welfare System" refers to a system dealing with children at risk and
children in conflict with the law, which provides child-appropriate proceedings, including
programs and services for prevention, diversion, rehabilitation, re-integration and aftercare to
ensure their normal growth and development.

(n) "Law Enforcement Officer" refers to the person in authority or his/her agent as defined in
Article 152 of the Revised Penal Code, including a barangay tanod.

(0) "Offense" refers to any act or omission whether punishable under special laws or the Revised
Penal Code, as amended.

(p) "Recognizance" refers to an undertaking in lieu of a bond assumed by a parent or custodian

who shall be responsible for the appearance in court of the child in conflict with the law, when
required.

327
 (q) "Restorative Justice" refers to a principle which requires a process of resolving conflicts with
the maximum involvement of the victim, the offender and the community. It seeks to obtain
reparation for the victim; reconciliation of the offender, the offended and the community; and
reassurance to the offender that he/she can be reintegrated into society. It also enhances public
safety by activating the offender, the victim and the community in prevention strategies.

(r) "Status Offenses" refers to offenses which discriminate only against a child, while an adult
does not suffer any penalty for committing similar acts. These shall include curfew violations;
truancy, parental disobedience and the like.

(s) "Youth Detention Home" refers to a 24-hour child-caring institution managed by accredited
local government units (LGUs) and licensed and/or accredited nongovernment organizations
(NGOs) providing short-term residential care for children in conflict with the law who are
awaiting court disposition of their cases or transfer to other agencies or jurisdiction.

(t) "Youth Rehabilitation Center" refers to a 24-hour residential care facility managed by the
Department of Social Welfare and Development (DSWD), LGUs, licensed and/or accredited
NGOs monitored by the DSWD, which provides care, treatment and rehabilitation services for
children in conflict with the law. Rehabilitation services are provided under the guidance of a
trained staff where residents are cared for under a structured therapeutic environment with the end
view of reintegrating them into their families and communities as socially functioning
individuals. Physical mobility of residents of said centers may be restricted pending court
disposition of the charges against them.

(u) "Victimless Crimes" refers to offenses where there is no private offended party.

CHAPTER 2
PRINCIPLES IN THE ADMINISTRATION OF JUVENILE JUSTICE AND WELFARE

SEC. 5. Rights of the Child in Conflict with the Law. - Every child in conflict with the law shall have the
following rights, including but not limited to:

(a) the right not to be subjected to torture or other cruel, inhuman or degrading treatment or
punishment;

(b) the right not to be imposed a sentence of capital punishment or life imprisonment, without the
possibility of release;

(c) the right not to be deprived, unlawfully or arbitrarily, of his/her liberty; detention or
imprisonment being a disposition of last resort, and which shall be for the shortest appropriate
period of time;

(d) the right to be treated with humanity and respect, for the inherent dignity of the person, and in
a manner which takes into account the needs of a person of his/her age. In particular, a child
deprived of liberty shall be separated from adult offenders at all times. No child shall be detained
together with adult offenders. He/She shall be conveyed separately to or from court. He/She shall
await hearing of his/her own case in a separate holding area. A child in conflict with the law shall
have the right to maintain contact with his/her family through correspondence and visits, save in
exceptional circumstances;

328
 (e) the right to prompt access to legal and other appropriate assistance, as well as the right to
challenge the legality of the deprivation of his/her liberty before a court or other competent,
independent and impartial authority, and to a prompt decision on such action;

(f) the right to bail and recognizance, in appropriate cases;

(g) the right to testify as a witness in hid/her own behalf under the rule on examination of a child
witness;

(h) the right to have his/her privacy respected fully at all stages of the proceedings;

(i) the right to diversion if he/she is qualified and voluntarily avails of the same;

(j) the right to be imposed a judgment in proportion to the gravity of the offense where his/her
best interest, the rights of the victim and the needs of society are all taken into consideration by
the court, under the principle of restorative justice;

(k) the right to have restrictions on his/her personal liberty limited to the minimum, and where
discretion is given by law to the judge to determine whether to impose fine or imprisonment, the
imposition of fine being preferred as the more appropriate penalty;

(I) in general, the right to automatic suspension of sentence;

(m) the right to probation as an alternative to imprisonment, if qualified under the Probation Law;

(n) the right to be free from liability for perjury, concealment or misrepresentation; and

(o) other rights as provided for under existing laws, rules and regulations.

The State further adopts the provisions of the United Nations Standard Minimum Rules for the
Administration of Juvenile Justice or "Beijing Rules", United Nations Guidelines for the Prevention of
Juvenile Delinquency or the "Riyadh Guidelines", and the United Nations Rules for the Protection of
Juveniles Deprived of Liberty.

SEC. 6. Minimum Age of Criminal Responsibility. - A child fifteen (15) years of age or under at the time
of the commission of the offense shall be exempt from criminal liability. However, the child shall be
subjected to an intervention program pursuant to Section 20 of this Act.

A child above fifteen (15) years but below eighteen (18) years of age shall likewise be exempt from
criminal liability and be subjected to an intervention program, unless he/she has acted with discernment,
in which case, such child shall be subjected to the appropriate proceedings in accordance with this Act.

The exemption from criminal liability herein established does not include exemption from civil liability,
which shall be enforced in accordance with existing laws.

SEC. 7. Determination ofAge. - The child in conflict with the law shall enjoy the presumption of
minority. He/She shall enjoy all the rights of a child in conflict with the law until he/she is proven to be
eighteen (18) years old or older. The age of a child may be determined from the child's birth certificate,
baptismal certificate or any other pertinent documents. In the absence of these documents, age may be

329
based on information from the child himself/herself, testimonies of other persons, the physical appearance
of the child and other relevant evidence. In case of doubt as to the age of the child, it shall be resolved in
his/her favor.

Any person contesting the age of the child in conflict with the law prior to the filing of the information in
any appropriate court may file a case in a summary proceeding for the determination of age before the
Family Court which shall decide the case within twenty-four (24) hours from receipt of the appropriate
pleadings of all interested parties.

If a case has been fiied against the child in conflict with the law and is pending in the appropriate court,
the person shall file a motion to determine the age of the child in the same court where the case is
pending. Pending hearing on the said motion, proceedings on the main case shall be suspended.

In all proceedings, law enforcement officers, prosecutors, judges and other government officials
concerned shall exert all efforts at determining the age of the child in conflict with the law.

TITLE II
STRUCTURES IN THE ADMINISTRATION OF JUVENILE JUSTICE AND WELFARE

SEC. 8. Juvenile Justice and Welfare Council (JJWC). - A Juvenile Justice and Welfare Council
(JJWC) is hereby created and attached to the Department of Justice and placed under its administrative
supervision. The JJWC shall be chaired by an undersecretary of the Department of Social Welfare and
Development. It shall ensure the effective implementation of this Act and coordination among the
following agencies:

(a) Council for the Welfare of Children (CWC);

(b) Department of Education (DepEd);

(c) Department of the Interior and Local Government (DILG);

(d) Public Attorney's Office (PAO);

(e) Bureau of Corrections (BUCOR);

(f) Parole and Probation Administration (PPA)

(g) National Bureau of Investigation (NBI);

(h) Philippine National Police (PNP);.

(i) Bureau of Jail Management and Penology (BJMP);

(i) Commission on Human Rights (CHR);

(k) Technical Education and Skills Development Authority (TESDA);

330
 (l) National Youth Commission (NYC); and

(m) Other institutions focused on juvenile justice and intervention programs.

The JJWC shall be composed of representatives, whose ranks shall not be lower than director, to be
designated by the concerned heads of the following departments or agencies:

(a) Department of Justice (DOJ);

(b) Department of Social Welfare and Development (DSWD);

(c) Council for the Welfare of Children (CWC)

(d) Department of Education (DepEd);

(e) Department of the Interior and Local Government (DILG)

(f) Commission on Human Rights (CHR);

(g) National Youth Commission (NYC); and

(h) Two (2) representatives from NGOs, one to be designated by the Secretary of Justice and the
other to be designated by the Secretary of Social Welfare and Development.

The JJWC shall convene within fifteen (15) days from the effectivity of this Act. The Secretary of Justice
and the Secretary of Social Welfare and Development shall determine the organizational structure and
staffing pattern of the JJWC.

The JJWC shall coordinate with the Office of the Court Administrator and the Philippine Judicial
Academy to ensure the realization of its mandate and the proper discharge of its duties and functions, as
herein provided.

SEC. 9. Duties and Functions of the JJWC. - The JJWC shall have the following duties and functions:

(a) To oversee the implementation of this Act;

(b) To advise the President on all matters and policies relating to juvenile justice and welfare;

(c) To assist the concerned agencies in the review and redrafting of existing policies/regulations
or in the formulation of new ones in line with the provisions of this Act;

(d) To periodically develop a comprehensive 3 to 5-year national juvenile intervention program,

with the participation of government agencies concerned, NGOs and youth organizations;

(e) To coordinate the implementation of the juvenile intervention programs and activities by
national government agencies and other activities which may have an important bearing on the
success of the entire national juvenile intervention program. All programs relating to juvenile
justice and welfare shall be adopted in consultation with the JJWC;

331
 (f) To formulate and recommend policies and strategies in consultation with children for the
prevention of juvenile delinquency and the administration of justice, as well as for the treatment
and rehabilitation of the children in conflict with the law;

(g) To collect relevant information and conduct continuing research and support evaluations and
studies on all matters relating to juvenile justice and welfare, such as but not limited to:

(1) the performance and results achieved by juvenile intervention programs and by
activities of the local government units and other government agencies;

(2) the periodic trends, problems and causes of juvenile delinquency and crimes; and

(3) the particular needs of children in conflict with the law in custody.

The data gathered shall be used by the JJWC in the improvement of the administration of juvenile
justice and welfare system.

The JJWC shall set up a mechanism to ensure that children are involved in research and policy
development.

(h) Through duly designated persons and with the assistance of the agencies provided in the
preceding section, to conduct regular inspections in detention and rehabilitation facilities and to
undertake spot inspections on their own initiative in order to check compliance with the standards
provided herein and to make the necessary recommendations to appropriate agencies;

(i) To initiate and coordinate the conduct of trainings for the personnel of the agencies involved in
the administration of the juvenile justice and welfare system and the juvenile intervention
program;

(j) To submit an annual report to the President on the implementation of this Act; and

(k) To perform such other functions as may be necessary to implement the provisions of this Act.

SEC. 10. Policies and Procedures on Juvenile Justice and Welfare. - All government agencies
enumerated in Section 8 shall, with the assistance of the JJWC and within one (1) year from the
effectivity of this Act, draft policies and procedures consistent with the standards set in the law. These
policies and procedures shall be modified accordingly in consultation with the JJWC upon the completion
of the national juvenile intervention program as provided under Section 9 (d).

SEC. 11. Child Rights Center (CRC). - The existing Child Rights Center of the Commission on Human
Rights shall ensure that the status, rights and interests of children are upheld in accordance with the
Constitution and international instruments on human rights. The CHR shall strengthen the monitoring of
government compliance of all treaty obligations, including the timely and regular submission of reports
before the treaty bodies, as well as the implementation and dissemination of recommendations and
conclusions by government agencies as well as NGOs and civil society.

332
 TITLE III
PREVENTION OF JUVENILE DELINQUENCY

CHAPTER 1
THE ROLE OF THE DIFFERENT SECTORS

SEC. 12. The Family. - The family shall be responsible for the primary nurturing and rearing of children
which is critical in delinquency prevention. As far as practicable and in accordance with the procedures of
this Act, a child in conflict with the law shall be maintained in his/her family.

SEC. 13. The Educational System. - Educational institutions shall work together with families,
community organizations and agencies in the prevention of juvenile delinquency and in the rehabilitation
and reintegration of child in conflict with the law. Schools shall provide adequate, necessary and
individualized educational schemes for children manifesting difficult behavior and children in conflict
with the law. In cases where children in conflict with the law are taken into custody or detained in
rehabilitation centers, they should be provided the opportunity to continue learning under an alternative
learning system with basic literacy program or non- formal education accreditation equivalency system.

SEC. 14. The Role of the Mass Media. - The mass media shall play an active role in the promotion of
child rights, and delinquency prevention by relaying consistent messages through a balanced approach.
Media practitioners shall, therefore, have the duty to maintain the highest critical and professional
standards in reporting and covering cases of children in conflict with the law. In all publicity concerning
children, the best interest of the child should be the primordial and paramount concern. Any undue,
inappropriate and sensationalized publicity of any case involving a child in conflict with the law is hereby
declared a violation of the child's rights.

SEC. 15. Establishment and Strengthening of Local Councils for the Protection of Children. - Local
Councils for the Protection of Children (LCPC) shall be established in all levels of local government, and
where they have already been established, they shall be strengthened within one (1) year from the
effectivity of this Act. Membership in the LCPC shall be chosen from among the responsible members of
the community, including a representative from the youth sector, as well as representatives from
government and private agencies concerned with the welfare of children.

The local council shall serve as the primary agency to coordinate with and assist the LGU concerned for
the adoption of a comprehensive plan on delinquency prevention, and to oversee its proper
implementation.

One percent (1%) of the internal revenue allotment of barangays, municipalities and cities shall be
allocated for the strengthening and implementation of the programs of the LCPC: Provided, That the
disbursement of the fund shall be made by the LGU concerned.

SEC. 16. Appointment of Local Social Welfare and Development Officer. - All LGUs shall appoint a
duly licensed social worker as its local social welfare and development officer tasked to assist children in
conflict with the law.

SEC. 17. The Sangguniang Kabataan. - The Sangguniang Kabataan (SK) shall coordinate with the
LCPC in the formulation and implementation of juvenile intervention and diversion programs in the
community.

333
 CHAPTER 2
COMPREHENSIVE JUVENILE INTERVENTION PROGRAM

SEC. 18. Development of a Comprehensive Juvenile Intervention Program. - A Comprehensive

juvenile intervention program covering at least a 3-year period shall be instituted in LGUs from the
barangay to the provincial level.

The LGUs shall set aside an amount necessary to implement their respective juvenile intervention
programs in their annual budget.

The LGUs, in coordination with the LCPC, shall call on all sectors concerned, particularly the child-
focused institutions, NGOs, people's organizations, educational institutions and government agencies
involved in delinquency prevention to participate in the planning process and implementation of juvenile
intervention programs. Such programs shall be implemented consistent with the national program
formulated and designed by the JJWC. The implementation of the comprehensive juvenile intervention
program shall be reviewed and assessed annually by the LGUs in coordination with the LCPC. Results of
the assessment shall be submitted by the provincial and city governments to the JJWC not later than
March 30 of every year.

SEC. 19. Community-based Programs on Juvenile Justice and Welfare. - Community-based programs
on juvenile justice and welfare shall be instituted by the LGUs through the LCPC, school, youth
organizations and other concerned agencies. The LGUs shall provide community-based services which
respond to the special needs, problems, interests and concerns of children and which offer appropriate
counseling and guidance to them and their families. These programs shall consist of three levels:

(a) Primary intervention includes general measures to promote social justice and equal
opportunity, which tackle perceived root causes of offending;

(b) Secondary intervention includes measures to assist children at risk; and

(c) Tertiary intervention includes measures to avoid unnecessary contact with the formal justice
system and other measures to prevent re-offending.

TITLE IV
TREATMENT OF CHILDREN BELOW THE AGE OF CRIMINAL RESPONSIBILITY

SEC. 20. Children Below the Age of Criminal Responsibility. - If it has been determined that the child
taken into custody is fifteen (15) years old or below, the authority which will have an initial contact with
the child has the duty to immediately release the child to the custody of his/her parents or guardian, or in
the absence thereof, the child's nearest relative. Said authority shall give notice to the local social welfare
and development officer who will determine the appropriate programs in consultation with the child and
to the person having custody over the child. If the parents, guardians or nearest relatives cannot be
located, or if they refuse to take custody, the child may be released to any of the following: a duly
registered nongovernmental or religious organization; a barangay official or a member of the Barangay
Council for the Protection of Children (BCPC); a local social welfare and development officer; or when
and where appropriate, the DSWD. If the child referred to herein has been found by the Local Social
Welfare and Development Office to be abandoned, neglected or abused by his parents, or in the event that

334
the parents will not comply with the prevention program, the proper petition for involuntary commitment
shall be filed by the DSWD or the Local Social Welfare and Development Office pursuant to Presidential
Decree No. 603, otherwise ,known as "The Child and Youth Welfare Code".

TITLE V
JUVENILE JUSTICE AND WELFARE SYSTEM

CHAPTER I
INITIAL CONTACT WITH THE CHILD

SEC. 21. Procedure for Taking the Child into Custody. - From the moment a child is taken into custody,
the law enforcement officer shall:

(a) Explain to the child in simple language and in a dialect that he/she can understand why he/she
is being placed under custody and the offense that he/she allegedly committed;

(b) Inform the child of the reason for such custody and advise the child of his/her constitutional
rights in a language or dialect understood by him/her;

(e) Properly identify himself/herself and present proper identification to the child;

(d) Refrain from using vulgar or profane words and from sexually harassing or abusing, or
making sexual advances on the child in conflict with the law;

(e) Avoid displaying or using any firearm, weapon, handcuffs or other instruments of force or
restraint, unless absolutely necessary and only after all other methods of control have been
exhausted and have failed;

(f) Refrain from subjecting the child in conflict with the law to greater restraint than is necessary
for his/her apprehension;

(g) Avoid violence or unnecessary force;

(h) Determine the age of the child pursuant to Section 7 of this Act;

(i) Immediately but not later than eight (8) hours after apprehension, turn over custody of the
child to the Social Welfare and Development Office or other accredited NGOs, and notify the
child's apprehension. The social welfare and development officer shall explain to the child and
the child's parents/guardians the consequences of the child's act with a view towards counseling
and rehabilitation, diversion from the criminal justice system, and reparation, if appropriate;

(j) Take the child immediately to the proper medical and health officer for a thorough physical
and mental examination. The examination results shall be kept confidential unless otherwise
ordered by the Family Court. Whenever the medical treatment is required, steps shall be
immediately undertaken to provide the same;

335
 (k) Ensure that should detention of the child in conflict with the law be necessary, the child shall
be secured in quarters separate from that of the opposite sex and adult offenders;

(l) Record the following in the initial investigation:

1. Whether handcuffs or other instruments of restraint were used, and if so, the reason for
such;

2. That the parents or guardian of a child, the DSWD, and the PA0 have been informed of
the apprehension and the details thereof; and

3. The exhaustion of measures to determine the age of a child and the precise details of
the physical and medical examination or the failure to submit a child to such
examination; and

(m) Ensure that all statements signed by the child during investigation shall be witnessed by the
child's parents or guardian, social worker, or legal counsel in attendance who shall affix his/her
signature to the said statement.

A child in conflict with the law shall only be searched by a law enforcement officer of the same gender
and shall not be locked up in a detention cell.

SEC. 22. Duties During Initial Investigation. - The law enforcement officer shall, in his/her
investigation, determine where the case involving the child in conflict with the law should be referred.

The taking of the statement of the child shall be conducted in the presence of the following: (1) child's
counsel of choice or in the absence thereof, a lawyer from the Public Attorney's Office; (2) the child's
parents, guardian, or nearest relative, as the case may be; and (3) the local social welfare and development
officer. In the absence of the child's parents, guardian, or nearest relative, and the local social welfare and
development officer, the investigation shall be conducted in the presence of a representative of an NGO,
religious group, or member of the BCPC.

After the initial investigation, the local social worker conducting the same may do either of the following:

(a) Proceed in accordance with Section 20 if the child is fifteen (15) years or below or above
fifteen (15) but below eighteen (18) years old, who acted without discernment; and

(b) If the child is above fifteen (15) years old but below eighteen (18) and who acted with
discernment, proceed to diversion under the following chapter.

CHAPTER 2
DIVERSION

SEC. 23. System of Diversion. - Children in conflict with the law shall undergo diversion programs
without undergoing court proceedings subject to the conditions herein provided:

(a) Where the imposable penalty for the crime committee is not more than six (6) years
imprisonment, the law enforcement officer or Punong Barangay with the assistance of the local
social welfare and development officer or other members of the LCPC shall conduct mediation,

336
 family conferencing and conciliation and, where appropriate, adopt indigenous modes of conflict
resolution in accordance with the best interest of the child with a view to accomplishing the
objectives of restorative justice and the formulation of a diversion program. The child and his/her
family shall be present in these activities.

(b) In victimless crimes where the imposable penalty is not more than six (6) years imprisonment,
the local social welfare and development officer shall meet with the child and his/her parents or
guardians for the development of the appropriate diversion and rehabilitation program, in
coordination with the BCPC;

(c) Where the imposable penalty for the crime committed exceeds six (6) years imprisonment,
diversion measures may be resorted to only by the court.

SEC. 24. Stages Where Diversion May be Conducted. - Diversion may be conducted at the Katarungang
Pambarangay, the police investigation or the inquest or preliminary investigation stage and at all 1evels
and phases of the proceedings including judicial level.

SEC. 25. Conferencing, Mediation and Conciliation. - A child in conflict with law may undergo
conferencing, mediation or conciliation outside the criminal justice system or prior to his entry into said
system. A contract of diversion may be entered into during such conferencing, mediation or conciliation
proceedings.

SEC. 26. Contract of Diversion. - If during the conferencing, mediation or conciliation, the child
voluntarily admits the commission of the act, a diversion program shall be developed when appropriate
and desirable as determined under Section 30. Such admission shall not be used against the child in any
subsequent judicial, quasi-judicial or administrative proceedings. The diversion program shall be effective
and binding if accepted by the parties concerned. The acceptance shall be in writing and signed by the
parties concerned and the appropriate authorities. The local social welfare and development officer shall
supervise the implementation of the diversion program. The diversion proceedings shall be completed
within forty-five (45) days. The period of prescription of the offense shall be suspended until the
completion of the diversion proceedings but not to exceed forty-five (45) days.

The child shall present himself/herself to the competent authorities that imposed the diversion program at
least once a month for reporting and evaluation of the effectiveness of the program.

Failure to comply with the terms and conditions of the contract of diversion, as certified by the local
social welfare and development officer, shall give the offended party the option to institute the
appropriate legal action.

The period of prescription of the offense shall be suspended during the effectivity of the diversion
program, but not exceeding a period of two (2) years.

SEC. 27. Duty of the Punong Barangay When There is No Diversion. - If the offense does not fall
under Section 23(a) and (b), or if the child, his/her parents or guardian does not consent to a diversion, the
Punong Barangay handling the case shall, within three (3) days from determination of the absence of
jurisdiction over the case or termination of the diversion proceedings, as the case may be, forward the
records of the case of the child to the law enforcement officer, prosecutor or the appropriate court, as the
case may be. Upon the issuance of the corresponding document, certifying to the fact that no agreement
has been reached by the parties, the case shall be filed according to the regular process.

337
SEC. 28. Duty of the Law Enforcement Officer When There is No Diversion. - If the offense does not
fall under Section 23(a) and (b), or if the child, his/her parents or guardian does not consent to a diversion,
the Women and Children Protection Desk of the PNP, or other law enforcement officer handling the case
of the child under custody, to the prosecutor or judge concerned for the conduct of inquest and/or
preliminary investigation to determine whether or not the child should remain under custody and
correspondingly charged in court. The document transmitting said records shall display the word
"CHILD" in bold letters.

SEC. 29. Factors in Determining Diversion Program. - In determining whether diversion is appropriate
and desirable, the following factors shall be taken into consideration:

(a) The nature and circumstances of the offense charged;

(b) The frequency and the severity of the act;

(c) The circumstances of the child (e.g. age, maturity, intelligence, etc.);

(d) The influence of the family and environment on the growth of the child;

(e) The reparation of injury to the victim;

(f) The weight of the evidence against the child;

(g) The safety of the community; and

(h) The best interest of the child.

SEC. 30. Formulation of the Diversion Program. - In formulating a diversion program, the individual
characteristics and the peculiar circumstances of the child in conflict with the law shall be used to
formulate an individualized treatment.

The following factors shall be considered in formulating a diversion program for the child:

(a) The child's feelings of remorse for the offense he/she committed;

(b) The parents' or legal guardians' ability to guide and supervise the child;

(c) The victim's view about the propriety of the measures to be imposed; and

(d) The availability of community-based programs for rehabilitation and reintegration of the
child.

SEC. 31. Kinds of Diversion Programs. - The diversion program shall include adequate socio-cultural
and psychological responses and services for the child. At the different stages where diversion may be
resorted to, the following diversion programs may be agreed upon, such as, but not limited to:

(a) At the level of the Punong Barangay:

(1) Restitution of property;

338
 (2) Reparation of the damage caused;

(3) Indemnification for consequential damages;

(4) Written or oral apology;

(5) Care, guidance and supervision orders;

(6) Counseling for the child in conflict with the law and the child's family;

(7)Attendance in trainings, seminars and lectures on:

(i) anger management skills;

(ii) problem solving and/or conflict resolution skills;

(iii) values formation; and

(iv) other skills which will aid the child in dealing with situations which can lead
to repetition of the offense;

(8) Participation in available community-based programs, including community service;

or

(9) Participation in education, vocation and life skills programs.

(b) At the level of the law enforcement officer and the prosecutor:

(1) Diversion programs specified under paragraphs (a)(1) to (a)(9) herein; and

(2) Confiscation and forfeiture of the proceeds or instruments of the crime;

(c) At the level of the appropriate court:

(1) Diversion programs specified under paragraphs(a)and (b) above;

(2) Written or oral reprimand or citation;

(3) Fine:

(4) Payment of the cost of the proceedings; or

(5) Institutional care and custody.

CHAPTER 3
PROSECUTION

339
SEC. 32. Duty of the Prosecutor's Office. - There shall be a specially trained prosecutor to conduct
inquest, preliminary investigation and prosecution of cases involving a child in conflict with the law. If
there is an allegation of torture or ill-treatment of a child in conflict with the law during arrest or
detention, it shall be the duty of the prosecutor to investigate the same.

SEC. 33. Preliminary Investigation and Filing of Information. - The prosecutor shall conduct a
preliminary investigation in the following instances: (a) when the child in conflict with the law does not
qualify for diversion: (b) when the child, his/her parents or guardian does not agree to diversion as
specified in Sections 27 and 28; and (c) when considering the assessment and recommendation of the
social worker, the prosecutor determines that diversion is not appropriate for the child in conflict with the
law.

Upon serving the subpoena and the affidavit of complaint, the prosecutor shall notify the Public
Attorney's Office of such service, as well as the personal information, and place of detention of the child
in conflict with the law.

Upon determination of probable cause by the prosecutor, the information against the child shall be filed
before the Family Court within forty-five (45) days from the start of the preliminary investigation.

CHAPTER 4
COURT PROCEEDINGS

SEC. 34. Bail. - For purposes of recommending the amount of bail, the privileged mitigating
circumstance of minority shall be considered.

SEC. 35. Release on Recognizance. - Where a child is detained, the court shall order:

(a) the release of the minor on recognizance to his/her parents and other suitable person;

(b) the release of the child in conflict with the law on bail; or

(c) the transfer of the minor to a youth detention home/youth rehabilitation center.

The court shall not order the detention of a child in a jail pending trial or hearing of his/her case.

SEC. 36. Detention of the Child Pending Trial. - Children detained pending trial may be released on bail
or recognizance as provided for under Sections 34 and 35 under this Act. In all other cases and whenever
possible, detention pending trial may be replaced by alternative measures, such as close supervision,
intensive care or placement with a family or in an educational setting or home. Institutionalization or
detention of the child pending trial shall be used only as a measure of last resort and for the shortest
possible period of time.

Whenever detention is necessary, a child will always be detained in youth detention homes established by
local governments, pursuant to Section 8 of the Family Courts Act, in the city or municipality where the
child resides.

In the absence of a youth detention home, the child in conflict with the law may be committed to the care
of the DSWD or a local rehabilitation center recognized by the government in the province, city or

340
municipality within the jurisdiction of the court. The center or agency concerned shall be responsible for
the child's appearance in court whenever required.

SEC. 37. Diversion Measures. - Where the maximum penalty imposed by law for the offense with which
the child in conflict with the law is charged is imprisonment of not more than twelve (12) years,
regardless of the fine or fine alone regardless of the amount, and before arraignment of the child in
conflict with the law, the court shall determine whether or not diversion is appropriate.

SEC. 38. Automatic Suspension of Sentence. - Once the child who is under eighteen (18) years of age at
the time of the commission of the offense is found guilty of the offense charged, the court shall determine
and ascertain any civil liability which may have resulted from the offense committed. However, instead of
pronouncing the judgment of conviction, the court shall place the child in conflict with the law under
suspended sentence, without need of application: Provided, however, That suspension of sentence shall
still be applied even if the juvenile is already eighteen years (18) of age or more at the time of the
pronouncement of his/her guilt.

Upon suspension of sentence and after considering the various chcumstances of the child, the court shall
impose the appropriate disposition measures as provided in the Supreme Court Rule on Juveniles in
Conflict with the Law.

SEC. 39. Discharge of the Child in Conflict with the Law. - Upon the recommendation of the social
worker who has custody of the child, the court shall dismiss the case against the child whose sentence has
been suspended and against whom disposition measures have been issued, and shall order the final
discharge of the child if it finds that the objective of the disposition measures have been fulfilled.

The discharge of the child in conflict with the law shall not affect the civil liability resulting from the
commission of the offense, which shall be enforced in accordance with law.

SEC. 40. Return of the Child in Conflict with the Law to Court. - If the court finds that the objective of
the disposition measures imposed upon the child in conflict with the law have not been fulfilled, or if the
child in conflict with the law has willfully failed to comply with the conditions of his/her disposition or
rehabilitation program, the child in conflict with the law shall be brought before the court for execution of
judgment.

If said child in conflict with the law has reached eighteen (18) years of age while under suspended
sentence, the court shall determine whether to discharge the child in accordance with this Act, to order
execution of sentence, or to extend the suspended sentence for a certain specified period or until the child
reaches the maximum age of twenty-one (21) years.

SEC. 41. Credit in Service of Sentence. - The child in conflict with the law shall be credited in the
services of his/her sentence with the full time spent in actual commitment and detention under this Act.

SEC. 42. Probation as an Alternative to Imprisonment. - The court may, after it shall have convicted
and sentenced a child in conflict with the law, and upon application at any time, place the child on
probation in lieu of service of his/her sentence taking into account the best interest of the child. For this
purpose, Section 4 of Presidential Decree No. 968, otherwise known as the "Probation Law of 1976", is
hereby amended accordingly.

CHAPTER 5
CONFIDENTIALITY OF RECORDS AND PROCEEDINGS

341
SEC. 43. Confedentiality of Records and Proceedings. - All records and proceedings involving children
in conflict with the law from initial contact until final disposition of the case shall be considered
privileged and confidential. The public shall be excluded during the proceedings and the records shall not
be disclosed directly or indirectly to anyone by any of the parties or the participants in the proceedings for
any purpose whatsoever, except to determine if the child in conflict with the law may have his/hes
sentence suspended or if he/she may be granted probation under the Probation Law, or to enforce the civil
liability imposed in the criminal action.

The component authorities shall undertake all measures to protect this confidentiality of proceedings,
including non-disclosure of records to the media, maintaining a separate police blotter for cases involving
children in conflict with the law and adopting a system of coding to conceal material information which
will lead to the child's identity. Records of a child in conflict with the law shall not be used in subsequent
proceedings for cases involving the same offender as an adult, except when beneficial for the offender
and upon his/her written consent.

A person who has been in conflict with the law as a child shall not be held under any provision of law, to
be guilty of perjury or of concealment or misrepresentation by reason of his/her failure to acknowledge
the case or recite any fact related thereto in response to any inquiry made to him/her for any purpose.

TITLE VI
REHABILITATION AND REINTEGRATION

SEC. 44. Objective of Rehabilitation and Reintegration. - The objective of rehabilitation and
reintegration of children in conflict with the law is to provide them with interventions, approaches and
strategies that will enable them to improve their social functioning with the end goal of reintegration to
their families and as productive members of their communities.

SEC. 45. Court Order Required. - No child shall be received in any rehabilitation or training facility
without a valid order issued by the court after a hearing for the purpose. The details of this order shall be
immediately entered in a register exclusively for children in conflict with the law. No child shall be
admitted in any facility where there is no such register.

SEC. 46, Separate Facilities from Adults. - In all rehabilitation or training facilities, it shall be
mandatory that children shall be separated from adults unless they are members of the same family.
Under no other circumstance shall a child in conflict with the law be placed in the same confinement as
adults.

The rehabilitation, training or confinement area of children in conflict with the law shall provide a home
environment where children in conflict with the law can be provided with quality counseling and
treatment.

SEC. 47. Female Children. - Female children in conflict with the law placed in an institution shall be
given special attention as to their personal needs and problems. They shall be handled by female doctors,
correction officers and social workers, and shall be accommodated separately from male children in
conflict with the law.

342
SEC. 48. Gender-Sensitivity Training. - No personnel of rehabilitation and training facilities shall handle
children in conflict with the law without having undergone gender sensitivity training.

SEC. 49. Establishment of Youth Detention Homes. - The LGUs shall set aside an amount to build
youth detention homes as mandated by the Family Courts Act. Youth detention homes may also be
established by private and NGOs licensed and accredited by the DSWD, in consultation with the JJWC.

SEC. 50. Care and Maintenance of the Child in Conflict with the Law. - The expenses for the care and
maintenance of a child in conflict with the law under institutional care shall be borne by his/her parents or
those persons liable to support him/her: Provided, That in case his/her parents or those persons liable to
support him/her cannot pay all or part of said expenses, the municipality where the offense was
committed shall pay one-third (1/3) of said expenses or part thereof; the province to which the
municipality belongs shall pay one-third (1/3) and the remaining one-third (1/3) shall be borne by the
national government. Chartered cities shall pay two-thirds (2/3) of said expenses; and in case a chartered
city cannot pay said expenses, part of the internal revenue allotments applicable to the unpaid portion
shall be withheld and applied to the settlement of said obligations: Provided, further, That in the event
that the child in conflict with the law is not a resident of the municipality/city where the offense was
committed, the court, upon its determination, may require the city/municipality where the child in conflict
with the law resides to shoulder the cost.

All city and provincial governments must exert effort for the immediate establishment of local detention
homes for children in conflict with the law.

SEC. 51. Confinement of Convicted Children in Agricultural Camps and other Training Facilities. - A
child

in conflict with the law may, after conviction and upon order of the court, be made to serve his/her
sentence, in lieu of confinement in a regular penal institution, in an agricultural camp and other training
facilities that may be established, maintained, supervised and controlled by the BUCOR, in coordination
with the DSWD.

SEC. 52. Rehabilitation of Children in Conflict with the Law. - Children in conflict with the law, whose
sentences are suspended may, upon order of the court, undergo any or a combination of disposition
measures best suited to the rehabilitation and welfare of the child as provided in the Supreme Court Rule
on Juveniles in Conflict with the Law.

If the community-based rehabilitation is availed of by a child in conflict with the law, he/she shall be
released to parents, guardians, relatives or any other responsible person in the community. Under the
supervision and guidance of the local social welfare and development officer, and in coordination with
his/her parents/guardian, the child in conflict with the law shall participate in community-based programs,
which shall include, but not limited to:

(1) Competency and life skills development;

(2) Socio-cultural and recreational activities;

(3) Community volunteer projects;

(4) Leadership training;

343
 (5) Social services;

(6) Homelife services;

(7) Health services; .

(8) Spiritual enrichment; and

(9) Community and family welfare services.

In accordance therewith, the family of the child in conflict with the law shall endeavor to actively
participate in the community-based rehabilitation.

Based on the progress of the youth in the community, a final report will be forwarded by the local social
welfare and development officer to the court for final disposition of the case.

If the community-based programs are provided as diversion measures under Chapter II, Title V, the
programs enumerated above shall be made available to the child in conflict with the law.

SEC. 53. Youth Rehabilitation Center. - The youth rehabilitation center shall provide 24-hour group
care, treatment and rehabilitation services under the guidance of a trained staff where residents are cared
for under a structured therapeutic environment with the end view of reintegrating them in their families
and communities as socially functioning individuals. A quarterly report shall be submitted by the center
to the proper court on the progress of the children in conflict with the law. Based on the progress of the
youth in the center, a final report will be forwarded to the court for final disposition of the case. The
DSWD shall establish youth rehabilitation centers in each region of the country.

SEC. 54. Objectives of Community Based Programs. - The objectives of community-based programs are
as follows:

(a) Prevent disruption in the education or means of livelihood of the child in conflict with the law
in case he/she is studying, working or attending vocational learning institutions;

(b) Prevent separation of the child in conflict with the law from his/her parents/guardians to
maintain the support system fostered by their relationship and to create greater awareness of their
mutual and reciprocal responsibilities;

(c) Facilitate the rehabilitation and mainstreaming of the child in conflict with the law and
encourage community support and involvement; and

(d) Minimize the stigma that attaches to the child in conflict with the law by preventing jail
detention.

SEC. 55. Criteria of Community-Based Programs. - Every LGU shall establish community-based
programs that will focus on the rehabilitation and reintegration of the child. All programs shall meet the
criteria to be established by the JJWC which shall take into account the purpose of the program, the need
for the consent of the child and his/her parents or legal guardians, and the participation of the child-
centered agencies whether public or private.

344
SEC. 56. After-Care Support Services for Children in Conflict with the Law. - Children in conflict with
the law whose cases have been dismissed by the proper court because of good behavior as per
recommendation of the DSWD social worker and/or any accredited NGO youth rehabilitation center shall
be provided after-care services by the local social welfare and development officer for a period of at least
six (6) months. The service includes counseling and other community-based services designed to facilitate
social reintegration, prevent re-offending and make the children productive members of the community.

TITLE VII
GENERAL PROVISIONS

CHAPTER 1
EXEMPTING PROVISIONS

SEC. 57. Status Offenees. - Any conduct not considered an offense or not penalized if committed by an
adult shall not be considered an offense and shall not be punished if committed by a child.

SEC. 58. Offenses Not Applicable to Children. - Persons below eighteen (18) years of age shall be
exempt from prosecution for the crime of vagrancy and prostitution under Section 202 of the Revised
Penal Code, of mendicancy under Presidential Decree No. 1563, and sniffing of rugby under Presidential
Decree No. 1619, such prosecution being inconsistent with the United Nations Convention on the Rights
of the Child: Provided, That said persons shall undergo appropriate counseling and treatment program.

SEC. 59. Exemption from the Application of Death Penalty. - The provisions of the Revised Penal
Code, as amended, Republic Act No. 9165, otherwise known as the Comprehensive Dangerous Drugs Act
of 2002, and other special laws notwithstanding, no death penalty shall be imposed upon children in
conflict with the law.

CHAPTER 2
PROHIBITED ACTS

SEC. 60. Prohibition Against Labeling and Shaming. - In the conduct of the proceedings beginning
from the initial contact with the child, the competent authorities must refrain from branding or labeling
children as young criminals, juvenile delinquents, prostitutes or attaching to them in any manner any
other derogatory names. Likewise, no discriminatory remarks and practices shall be allowed particularly
with respect to the child's class or ethnic origin.

SEC. 61. Other Prohibited Acts. - The following and any other similar acts shall be considered
prejudicial and detrimental to the psychological, emotional, social, spiritual, moral and physical health
and well-being of the child in conflict with the law and therefore, prohibited:

(a) Employment of threats of whatever kind and nature;

(b) Employment of abusive, coercive and punitive measures such as cursing, beating, stripping,
and solitary confinement;

345
 (c) Employment of degrading, inhuman end cruel forms of punishment such as shaving the heads,
pouring irritating, corrosive or harmful substances over the body of the child in conflict with the
law, or forcing him/her to walk around the community wearing signs which embarrass, humiliate,
and degrade his/her personality and dignity; and

(d) Compelling the child to perform involuntary servitude in any and all forms under any and all
instances.

CHAPTER 3
PENAL PROVISION

SEC. 62. Violation of the Provisions of this Act or Rules or Regulations in General. - Any person who
violates any provision of this Act or any rule or regulation promulgated in accordance thereof shall, upon
conviction for each act or omission, be punished by a fine of not less than Twenty thousand pesos
(P20,000.00) but not more than Fifty thousand pesos (P50,000.00) or suffer imprisonment of not less than
eight (8) years but not more than ten (10) years, or both such fine and imprisonment at the discretion of
the court, unless a higher penalty is provided for in the Revised Penal Code or special laws. If the
offender is a public officer or employee, he/she shall, in addition to such fine and/or imprisonment, be
held administratively liable and shall suffer the penalty of perpetual absolute disqualification.

CHAPTER 4
APPROPRIATION PROVISION

SEC. 63. Appropriations. - The amount necessary to carry out the initial implementation of this Act shall
be charged to the Office of the President. Thereafter, such sums as may be necessary for the continued
implementation of this Act shall be included in the succeeding General Appropriations Act.

An initial amount of Fifty million pesos (P50,000,000.00) for the purpose of setting up the JJWC shall be
taken from the proceeds of the Philippine Charity Sweepstakes Office.

TITLE VIII
TRANSITORY PROVISIONS

SEC. 64. Children in Conflict with the Law Fifteen (15) Years Old and Below. - Upon effectivity of this
Act, cases of children fifteen (15) years old and below at the time of the commission of the crime shall
immediately be dismissed and the child shall be referred to the appropriate local social welfare and
development officer. Such officer, upon thorough assessment of the child, shall determine whether to
release the child to the custody of his/her parents, or refer the child to prevention programs as provided
under this Act. Those with suspended sentences and undergoing rehabilitation at the youth rehabilitation
center shall likewise be released, unless it is contrary to the best interest of the child.

SEC. 65. Children Detained Pending Dial. - If the child is detained pending trial, the Family Court shall
also determine whether or not continued detention is necessary and, if not, determine appropriate
alternatives for detention.

If detention is necessary and he/she is detained with adults, the court shall immediately order the transfer
of the child to a youth detention home.

346
SEC. 66. Inventory of "Locked-up" and Detained Children in Conflict with the Law. - The PNP, the
BJMP and the BUCOR are hereby directed to submit to the JJWC, within ninety (90) days from the
effectivity of this Act, an inventory of all children in conflict with the law under their custody.

SEC. 67. Children Who Reach the Age of Eighteen (18) Years Pending Diversion and Court
Proceedings. - If a child reaches the age of eighteen (18) years pending diversion and court proceedings,
the appropriate diversion authority in consultation with the local social welfare and development officer
or the Family Court in consultation with the Social Services and Counseling Division (SSCD) of the
Supreme Court, as the case may be, shall determine the appropriate disposition. In case the appropriate
court executes the judgment of conviction, and unless the child in conflict the law has already availed of
probation under Presidential Decree No. 603 or other similar laws, the child may apply for probation if
qualified under the provisions of the Probation Law.

SEC. 68. Children Who Have Been Convicted and are Serving Sentence. - Persons who have been
convicted and are serving sentence at the time of the effectivity of this Act, and who were below the age
of eighteen (18) years at the time the commission of the offense for which they were convicted and are
serving sentence, shall likewise benefit from the retroactive application of this Act. They shall be entitled
to appropriate dispositions provided under this Act and their sentences shall be adjusted accordingly.
They shall be immediately released if they are so qualified under this Act or other applicable law.

TITLE IX
FINAL PROVISIONS

SEC. 69. Rule Making Power. - The JJWC shall issue the IRRs for the implementation of the provisions
of this act within ninety (90) days from the effectivity thereof.

SEC. 70. Separability Clause. - If, for any reason, any section or provision of this Act is declared
unconstitutional or invalid by the Supreme Court, the other sections or provisions hereof not dfected by
such declaration shall remain in force and effect.

SEC. 71. Repealing Clause. - All existing laws, orders, decrees, rules and regulations or parts thereof
inconsistent with the provisions of this Act are hereby repealed or modified accordingly.

SEC. 72. Effectivity. - This Act shall take effect after fifteen (15) days from its publication in at least two
(2) national newspapers of general circulation.

Approved,

FRANKLIN DRILON JOSE DE VENECIA JR.

President of the Senate Speaker of the House of
Representatives

347
This Act which is a consolidation of Senate Bill No. 1402 and House Bill No. 5065 was finally passed by
the Senate and the House of Representatives on March 22, 2006.

OSCAR G. YABES ROBERTO P. NAZARENO

Secretary of Senate Secretary General
House of Represenatives

Approved: April 28, 2006

GLORIA MACAPAGAL-ARROYO
President of the Philippines

348
ADMINISTRATIVE CIRCULAR No. 08-2008

TO: ALL JUDGES

SUBJECT: GUIDELINES IN THE OBSERVANCE OF A RULE OF PREFERENCE IN THE

IMPOSITION OF PENALTIES IN LIBEL CASES.

Article 355 of the Revised Penal Code penalizes libel, committed by means of writing, printing, lithography,
engraving, radio, phonograph, painting, theatrical exhibition, cinematographic exhibition, or any similar
means, with prision correctional in its minimum and medium periods or fine ranging from 200 to 6,000
pesos, or both, in addition to the civil action which may be brought by the offended party.

In the following cases, the Court opted to impose only a fine on the person convicted of the crime of libel:

In Fernando Sazon v. Court of Appeals and People of the Philippines,1 the Court modified the penalty
imposed upon petitioner, an officer of a homeowners association, for the crime of libel from imprisonment
and fine in the amount of P200.00, to fine only of P3,000.00, with subsidiary imprisonment in case of
insolvency, for the reason that he wrote the libelous article merely to defend his honor against the malicious
messages that earlier circulated around the subdivision, which he thought was the handiwork of the private
complainant.

In Quirico Mari v. Court of Appeals and People of the Philippines,2 where the crime involved is slander by
deed, the Court modified the penalty imposed on the petitioner, an ordinary government employee, from
imprisonment to fine of P1,000.00, with subsidiary imprisonment in case of insolvency, on the ground that
the latter committed the offense in the heat of anger and in reaction to a perceived provocation.

In Roberto Brillante v. Court of Appeals and People of the Philippines,3 the Court deleted the penalty of
imprisonment imposed upon petitioner, a local politician, but maintained the penalty of fine of P4,0000.00,
with subsidiary imprisonment in case of insolvency, in each of the (5) cases of libel, on the ground that the
intensely feverish passions evoked during the election period in 1988 must have agitated petitioner into
writing his open letter; and that incomplete privileged communication should be appreciated in favor of
petitioner, especially considering the wide latitude traditionally given to defamatory utterances against
public officials in connection with or relevant to their performance of official duties or against public figures
in relation to matters of public interest involving them.

In Jose Alemania Buatis, Jr. v. People of the Philippines and Atty. Jose Pieraz,4 the Court opted to impose
upon petitioner, a lawyer, the penalty of fine only for the crime of libel considering that it was his first
offense and he was motivated purely by his belief that he was merely exercising a civic or moral duty to
his client when wrote the defamatory letter to private complainant.

The foregoing cases indicate an emergent rule of preference for the imposition of fine only rather than
imprisonment in libel cases under the circumstances therein specified.

All courts and judges concerned should henceforth take note of the foregoing rule of preference set by the
Supreme Court on the matter of the imposition of penalties for the crime of libel bearing in mind the
following principles:

1. This Administrative Circular does not remove imprisonment as an alternative penalty for
the crime libel under Article 355 of the Revised Penal Code;

349
 2. The Judges concerned may, in the exercise of sound discretion, and taking into
consideration the peculiar circumstances of each case, determine whether the imposition
of a fine alone would best serve the interests of justice or whether forbearing to impose
imprisonment would depreciate the seriousness of the offense, work violence on the social
order, or otherwise be contrary to the imperative of justice;
3. Should only a fine be imposed and the accused be unable to pay the fine, there is no legal
obstacle to the application of the Revised Penal Code provision on subsidiary
imprisonment.

The Court Administrator shall cause the immediate dissemination of this Administrative Circular to all
courts and judges concerned.

This Administrative Circular, approved by the Supreme Court En Banc in A.M. No. 08-1-17 SC at its
session of 22 January 2008 shall take effect upon its issuance.

Issued this 25th day of January 2008.

(SGD.) REYNATO S. PUNO

Chief Justice

Footnotes

1
325 Phil. 1053, 1068 (1996).

2
388 Phil. 269, 279 (2000).

3
G.R. Nos. 118757 & 121571, November 11, 2005, 474 SCRA 480.

4
G.R. No. 142509, March 24, 2006, 485 SCRA 275.

350
PRESIDENTIAL DECREE No. 1613

AMENDING THE LAW ON ARSON

WHEREAS, findings of the police and intelligence agencies of the government reveal that fires and other
crimes involving destruction in Metro Manila and other urban centers in the country are being perpetrated
by criminal syndicates, some of which have foreign connections;

WHEREAS, the current law on arson suffers from certain inadequacies that impede the successful
enforcement and prosecution of arsonists;

WHEREAS, it is imperative that the high incidence of fires and other crimes involving destruction be
prevented to protect the national economy and preserve the social, economic and political stability of the
country;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution, do hereby order and decree as part of the law of the land, the
following:

Section 1. Arson. Any person who burns or sets fire to the property of another shall be punished by
Prision Mayor.

The same penalty shall be imposed when a person sets fire to his own property under circumstances
which expose to danger the life or property of another.

Section 2. Destructive Arson. The penalty of Reclusion Temporal in its maximum period to Reclusion
Perpetua shall be imposed if the property burned is any of the following:

1. Any ammunition factory and other establishment where explosives, inflammable or

combustible materials are stored.

2. Any archive, museum, whether public or private, or any edifice devoted to culture, education
or social services.

3. Any church or place of worship or other building where people usually assemble.

4. Any train, airplane or any aircraft, vessel or watercraft, or conveyance for transportation of
persons or property

4. Any building where evidence is kept for use in any legislative, judicial, administrative or other
official proceedings.

5. Any hospital, hotel, dormitory, lodging house, housing tenement, shopping center, public or
private market, theater or movie house or any similar place or building.

6. Any building, whether used as a dwelling or not, situated in a populated or congested area.

Section 3. Other Cases of Arson. The penalty of Reclusion Temporal to Reclusion Perpetua shall be
imposed if the property burned is any of the following:

351
 1. Any building used as offices of the government or any of its agencies;

2. Any inhabited house or dwelling;

3. Any industrial establishment, shipyard, oil well or mine shaft, platform or tunnel;

4. Any plantation, farm, pastureland, growing crop, grain field, orchard, bamboo grove or forest;

4. Any rice mill, sugar mill, cane mill or mill central; and

5. Any railway or bus station, airport, wharf or warehouse.

Section 4. Special Aggravating Circumstances in Arson. The penalty in any case of arson shall be
imposed in its maximum period;

1. If committed with intent to gain;

2. If committed for the benefit of another;

3. If the offender is motivated by spite or hatred towards the owner or occupant of the property
burned;

4. If committed by a syndicate.

The offense is committed by a syndicate if its is planned or carried out by a group of three (3) or more
persons.

Section 5. Where Death Results from Arson. If by reason of or on the occasion of the arson death results,
the penalty of Reclusion Perpetua to death shall be imposed.

Section 6. Prima Facie evidence of Arson. Any of the following circumstances shall constitute prima
facie evidence of arson:

1. If the fire started simultaneously in more than one part of the building or establishment.

2. If substantial amount of flammable substances or materials are stored within the building note
necessary in the business of the offender nor for household us.

3. If gasoline, kerosene, petroleum or other flammable or combustible substances or materials

soaked therewith or containers thereof, or any mechanical, electrical, chemical, or electronic
contrivance designed to start a fire, or ashes or traces of any of the foregoing are found in the
ruins or premises of the burned building or property.

4. If the building or property is insured for substantially more than its actual value at the time of
the issuance of the policy.

4. If during the lifetime of the corresponding fire insurance policy more than two fires have
occurred in the same or other premises owned or under the control of the offender and/or insured.

352
 5. If shortly before the fire, a substantial portion of the effects insured and stored in a building or
property had been withdrawn from the premises except in the ordinary course of business.

6. If a demand for money or other valuable consideration was made before the fire in exchange
for the desistance of the offender or for the safety of the person or property of the victim.

Section 7. Conspiracy to commit Arson. Conspiracy to commit arson shall be punished by Prision Mayor
in its minimum period.

Section 8. Confiscation of Object of Arson. The building which is the object of arson including the land
on which it is situated shall be confiscated and escheated to the State, unless the owner thereof can prove
that he has no participation in nor knowledge of such arson despite the exercise of due diligence on his
part.

Section 9. Repealing Clause. The provisions of Articles 320 to 326-B of the Revised Penal Code and all
laws, executive orders, rules and regulations, or parts thereof, inconsistent with the provisions of this
Decree are hereby repealed or amended accordingly.

Section 10. Effectivity. This Decree shall take effect immediately upon publication thereof at least once in
a newspaper of general circulation.

Done in the City of Manila, this 7th day of March, in the year of Our Lord, nineteen hundred and seventy-
nine.

353
Republic Act No. 9775

AN ACT DEFINING THE CRIME OF CHILD PORNOGRAPHY, PRESCRIBING PENALTIES

THEREFOR AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Anti-Child Pornography Act of 2009."

Section 2. Declaration of Policy. - The State recognizes the vital role of the youth in nation building and
shall promote and protect their physical, moral, spiritual, intellectual, emotional, psychological and social
well-being. Towards this end, the State shall:

(a) Guarantee the fundamental rights of every child from all forms of neglect, cruelty and other
conditions prejudicial to his/her development;

(b) Protect every child from all forms of exploitation and abuse including, but not limited to:

(1) the use of a child in pornographic performances and materials; and

(2) the inducement or coercion of a child to engage or be involved in pornography

through whatever means; and

(c) Comply with international treaties to which the Philippines is a signatory or a State party
concerning the rights of children which include, but not limited to, the Convention on the Rights
of the Child, the Optional Protocol to the Convention on the Rights of the Child of the Child on
the Sale of Children, Child Prostitution and Child Pornography, the International Labor
Organization (ILO) Convention No.182 on the Elimination of the Worst Forms of Child Labor
and the Convention Against Transnational Organized Crime.

Section 3. Definition of Terms. -

(a) "Child" refers to a person below eighteen (18) years of age or over, but is unable to fully take
care of himself/herself from abuse, neglect, cruelty, exploitation or discrimination because of a
physical or mental disability or condition.

For the purpose of this Act, a child shall also refer to:

(1) a person regardless of age who is presented, depicted or portrayed as a child as

defined herein; and

(2) computer-generated, digitally or manually crafted images or graphics of a person who

is represented or who is made to appear to be a child as defined herein.

(b) "Child pornography" refers to any representation, whether visual, audio, or written
combination thereof, by electronic, mechanical, digital, optical, magnetic or any other means, of
child engaged or involved in real or simulated explicit sexual activities.

(c) "Explicit Sexual Activity" includes actual or simulated -

354
 (1) As to form:

(i) sexual intercourse or lascivious act including, but not limited to, contact involving
genital to genital, oral to genital, anal to genital, or oral to anal, whether between persons
of the same or opposite sex;

(2) bestiality;

(3) masturbation;

(4) sadistic or masochistic abuse;

(5) lascivious exhibition of the genitals, buttocks, breasts, pubic area and/or anus; or

(6) use of any object or instrument for lascivious acts

(d) "Internet address" refers to a website, bulletin board service, internet chat room or news
group, or any other internet or shared network protocol address.

(e) "Internet cafe or kiosk" refers to an establishment that offers or proposes to offer services to
the public for the use of its computer/s or computer system for the purpose of accessing the
internet, computer games or related services.

(f) "Internet content host" refers to a person who hosts or who proposes to host internet content in
the Philippines.

(g) "Internet service provider (ISP)" refers to a person or entity that supplies or proposes to
supply, an internet carriage service to the public.

(h) "Grooming" refers to the act of preparing a child or someone who the offender believes to be
a child for sexual activity or sexual relationship by communicating any form of child
pornography. It includes online enticement or enticement through any other means.

(i) "Luring" refers to the act of communicating, by means of a computer system, with a child or
someone who the offender believes to be a child for the purpose of facilitating the commission of
sexual activity or production of any form of child pornography.(2) Bestiality;

(j) "Pandering" refers to the act of offering, advertising, promoting, representing or distributing
through any means any material or purported material that is intended to cause another to believe
that the material or purported material contains any form of child pornography, regardless of the
actual content of the material or purported material.

(k) "Person" refers to any natural or juridical entity.

Section 4. Unlawful or Prohibited Acts. - It shall be unlawful for any person:

(a) To hire, employ, use, persuade, induce or coerce a child to perform in the creation or
production of any form of child pornography;

355
 (b) To produce, direct, manufacture or create any form of child pornography;

(c) To publish offer, transmit, sell, distribute, broadcast, advertise, promote, export or import any
form of child pornography;

(d) To possess any form of child pornography with the intent to sell, distribute, publish, or
broadcast: Provided. That possession of three (3) or more articles of child pornography of the
same form shall be prima facie evidence of the intent to sell, distribute, publish or broadcast;

(e) To knowingly, willfully and intentionally provide a venue for the commission of prohibited
acts as, but not limited to, dens, private rooms, cubicles, cinemas, houses or in establishments
purporting to be a legitimate business;

(f) For film distributors, theaters and telecommunication companies, by themselves or in

cooperation with other entities, to distribute any form of child pornography;

(g) For a parent, legal guardian or person having custody or control of a child to knowingly
permit the child to engage, participate or assist in any form of child pornography;

(h) To engage in the luring or grooming of a child;

(i) To engage in pandering of any form of child pornography;

(j) To willfully access any form of child pornography;

(k) To conspire to commit any of the prohibited acts stated in this section. Conspiracy to commit
any form of child pornography shall be committed when two (2) or more persons come to an
agreement concerning the commission of any of the said prohibited acts and decide to commit it;
and

(l) To possess any form of child pornography.

Section 5. Syndicated Child Pornography - The crime of child pornography is deemed committed by a
syndicate if carried out by a group of three (3) or more persons conspiring or confederating with one
another and shall be punished under Section 15(a) of this Act.

Section 6. Who May File a Complaint. - Complaints on cases of any form of child pornography and other
offenses punishable under this Act may be filed by the following:

(a) Offended party;

(b) Parents or guardians;

(c) Ascendant or collateral relative within the third degree of consanguinity;

(d) Officer, social worker or representative of a licensed child-caring institution;

(e) Officer or social worker of the Department of Social Welfare and Development (DSWD);

356
 (f) Local social welfare development officer;

(g) Barangay chairman;

(h) Any law enforcement officer;

(i) At least three (3) concerned responsible citizens residing in the place where the violation
occurred; or

(j) Any person who has personal knowledge of the circumstances of the commission of any
offense under this Act.

Section 7. Appointment of Special Prosecutors. - The Department of Justice (DOJ) shall appoint or
designate special prosecutors to prosecute cases for the violation of this Act.

Section 8. Jurisdiction. - Jurisdiction over cases for the violation of this Act shall be vested in the Family
Court which has territorial jurisdiction over the place where the offense or any of its essential elements
was committed pursuant to Republic Act No. 8369, otherwise known as "Family Courts Act of 1997".

Section 9. Duties of an Internet Service Provider (ISP). - All internet service providers (ISPs) shall notify
the Philippine National Police (PNP) or the National Bureau of Investigation (NBI) within seven (7) days
from obtaining facts and circumstances that any form of child pornography is being committed using its
server or facility. Nothing in this section may be construed to require an ISP to engage in the monitoring
of any user, subscriber or customer, or the content of any communication of any such person: Provided,
That no ISP shall be held civilly liable for damages on account of any notice given in good faith in
compliance with this section.

Furthermore, an ISP shall preserve such evidence for purpose of investigation and prosecution by relevant
authorities.

An ISP shall, upon the request of proper authorities, furnish the particulars of users who gained or
attempted to gain access to an internet address which contains any form of child pornography.

All ISPs shall install available technology, program or software to ensure that access to or transmittal of
any form of child pornography will be blocked or filtered.

An ISP who shall knowingly, willfully and intentionally violate this provision shall be subject to the
penalty provided under Section 15(k) of this Act.

The National Telecommunications Commission (NTC) shall promulgate within ninety (90) days from the
effectivity of this Act the necessary rules and regulations for the implementation of this provision which
shall include, among others, the installation of filtering software that will block access to or transmission
of any form of the child pornography.

Section 10. Responsibility of Mall Owners/Operators and Owners or Lessors of Other Business
Establishments. - All mall owners/operators and owners or lessors of other business establishments shall
notify the PNP or the NBI within seven (7) days from obtaining facts and circumstances that child
pornography is being committed in their premises. Provided, That public display of any form of child
pornography within their premises is a conclusive presumption of the knowledge of the mall

357
owners/operators and owners or lessors of other business establishments of the violation of this
Act: Provided, further, That a disputable presumption of knowledge by mall owners/operators and owners
or lessors of other business establishments should know or reasonably know that a violation of this Act is
being committed in their premises.

Photo developers, information technology professionals, credit card companies and banks and any person
who has direct knowledge of any form of child pornography activities shall have the duty to report any
suspected child pornography materials or transactions to the proper authorities within seven (7) days from
discovery thereof.

Any willful and intentional violation of this provision shall be subject to the penalty provided under
Section 15(l) of this Act.

Section 11. Duties of an Internet Content Host. - An internet content host shall:

(a) Not host any form of child pornography on its internet address;

(b) Within seven (7) days, report the presence of any form of child pornography, as well as the
particulars of the person maintaining, hosting, distributing or in any manner contributing to such
internet address, to the proper authorities; and

(c) Preserve such evidence for purposes of investigation and prosecution by relevant authorities.

An internet content host shall, upon the request of proper authorities, furnish the particulars of users who
gained or attempted to gain access to an internet address that contains any form of child pornography.

An internet content host who shall knowingly, willfully and intentionally violate this provision shall be
subject to the penalty provided under Section 15(j) of this Act: Provided, That the failure of the internet
content host to remove any form of child pornography within forty-eight (48) hours from receiving the
notice that any form of child pornography is hitting its server shall be conclusive evidence of willful and
intentional violation thereof.

Section 12. Authority to Regulate Internet Caf or Kiosk. - The local government unit (LGU) of the city
or municipality where an internet caf or kiosk is located shall have the authority to monitor and regulate
the establishment and operation of the same or similar establishments in order to prevent violation of the
provisions of this Act.

Section 13. Confidentiality. - The right to privacy of the child shall be ensured at any stage of the
investigation, prosecution and trial of an offense under this Act. Towards this end, the following rules
shall be observed:

(a) The judge, prosecutor or any officer of the law to whom the complaint has been referred to
may, whenever necessary to ensure a fair and impartial proceeding and after considering all
circumstances for the best interest of the child conduct a closed-door investigation, prosecution or
trial;

(b) The name and personal circumstances of the child, including the child's immediate family, or
any other information tending to establish his/her identity shall not be disclosed to the public;

358
 (c) Any record regarding a child shall be confidential and kept under seal. Except upon written
request and order of the court, a record shall be released only to the following:

(1) Members of the court staff for administrative use;

(2) The prosecuting attorney;

(3) Defense counsel;

(4) The guardian ad litem;

(5) Agents of investigating law enforcement agencies and

(6) Other persons as determined by the court.

(d) Any form of child pornography that is part of the court records shall be subject to a protective
order that provides as follows:

(1) Any form of child pornography may be viewed only by the parties, their counsel, their
expert witness and guardian ad litem;

(2) Neither form of child pornography nor any portion thereof shall be divulged to any
other person, except as necessary for investigation, prosecution or trial; and

(3) No person shall be granted access to any form of child pornography or any part
thereof unless he/she signs a written affirmation that he/she has received and read a copy
of the protection order; that he/she submits to the jurisdiction of the court with respect to
the protective order; and that, in case of violation thereof, he/she will be subject to the
contempt power of the court; and

(e) In cases when prosecution or trial is conducted behind closed doors, it shall be unlawful for
any editor, publisher and reporter or columnist in case of printed materials, announcer or producer
in case of television and radio, producer and director of a film in case of the movie industry, or
any person utilizing the tri-media facilities or information technology to publish or broadcast the
names of the victims of any case of child pornography.

Any violation of this provision shall be subject to the penalty provided for under Section 15(m) of this
Act.

Section 14. Care, Custody and Treatment of a Child Victim. - The DSWD shall ensure that the child who
is a victim of any form of child pornography is provided appropriate care, custody and support for their
recovery and reintegration in accordance with existing laws.

The child and his family shall be entitled to protection as well as to the rights and benefits of witnesses
under Republic Act No. 6981, otherwise known as "The Witness Protection, Security and Benefit Act".

The child shall also be considered as a victim of a violent crime defined under Section 3(d) of Republic
Act No. 7309, otherwise known as "An Act Creating a Board of Claims under the Department of Justice

359
for Victims of Unjust Imprisonment or Detention and Victims of Violent Crimes and for Other Purposes",
so that the child may claim compensation therein.

Section 15. Penalties and Sanctions. - The following penalties and sanctions are hereby established for
offenses enumerated in this Act:

(a) Any person found guilty of syndicated child pornography as defined in Section 5 of this Act
shall suffer the penalty of reclusion perpetua and a fine of not less than Two million pesos
(Php2,000,000.00) but not more than Five million pesos (Php5,000,000.00);

(b) Any person found guilty of violating Section 4(a), (b) and (c) of this Act shall suffer the
penalty of reclusion temporal in its maximum period and a fine of not less than One million pesos
(Php1,000,000.00) but not more than Two million (Php2,000,000.00);

(c) Any person found guilty of violating Section 4(d), (e) and (f) of this Act shall suffer the
penalty of reclusion temporal in its medium period and a fine of not less than Seven hundred fifty
thousand pesos (Php750,000.00) but not more than One million pesos (Php1,000,000.00);

(d) Any person found guilty of violating Section 4(g) of this Act shall suffer the penalty
of reclusion temporal in its minimum period and a fine of not less than Five hundred thousand
pesos (Php500,000.00) but not more than Seven hundred thousand pesos (Php700,000.00);

(e) Any person found guilty of violating Section 4(h) of this Act shall suffer the penalty of prision
mayor in its maximum period and a fine of not less than Three hundred thousand pesos
(Php300,000.00) but not more than Five hundred thousand pesos (Php500,000.00);

(f) Any person found guilty of violating Section 4(I) of this Act shall suffer the penalty of prision
mayor in its minimum period and a fine of not less than Three hundred thousand pesos
(php300,000.00) but not more than Five hundred thousand pesos (Php500,000.00);

(g) Any person found guilty of violating Section 4(j) of this Act shall suffer the penalty of prision
correccional in its maximum period and a fine of not less than Two hundred thousand pesos
(Php200,000.00) but not more than Three hundred thousand pesos (Php300,000.00);

(h) Any person found guilty of violating Section 4(k) of this Act shall suffer the penalty
of prision correccionalin its medium period and a fine of not less than One hundred thousand
pesos (php100,000.00) but not more than Two hundred fifty thousand pesos (php250,000.00);

(i) Any person found guilty of violating Section 4(l) of this Act shall suffer the penalty of arresto
mayor in its minimum period and a fine of not less than Fifty thousand pesos (Php50,000.00) but
not more than One hundred thousand pesos (Php100,000.00);

(j) Any person found guilty of violating Section 11 of this Act shall suffer the penalty of prision
correccional in its medium period and a fine of not less than One million pesos
(Php1,000,000.00) but not more than Two million pesos (Php2,000,000.00) for the first offense.
In the case of a subsequent offense, the penalty shall be a fine not less than Two million pesos
(Php2,000,000.00) but not more than Three million pesos (Php3,000,000.00) and revocation of its
license to operate and immediate closure of the establishment;

360
 (k) Any ISP found guilty of willfully and knowingly failing to comply with the notice and
installation requirements under Section 9 of this Act shall suffer the penalty of a fine of not less
than Five hundred thousand pesos (Php500,000.00) but not more than One million pesos
(Php1,000,000.00) for the first offense. In case of subsequent offense, the penalty shall be a fine
of not less than One million pesos (Php1,000,000.00) but not more than Two million pesos
(Php2,000,000.00) and revocation of its license to operate;

(l) Any mall owner-operator and owner or lessor of other business establishments including photo
developers, information technology professionals, credit card companies and banks, found guilty
of willfully and knowingly failing to comply with the notice requirements under Section 10 of
this Act shall suffer the penalty of a fine of not less than One million pesos (Php1,000,000.00) but
not more than Two million pesos (Php2,000,000.00) for the first offense. In the case of a
subsequent offense, the penalty shall be a fine of not less than Two million pesos
(Php2,000,000.00) but not more than Three million pesos (Php3,000,000.00) and revocation of its
license to operate and immediate closure of the establishment; and

(m) Any person found guilty of violating Section 13 of this Act shall suffer the penalty of arresto
mayor in its minimum period and a fine of not less than One hundred thousand pesos
(Php100,000.00) but not more than Three hundred thousand pesos (Php300,000.00).

Section 16. Common Penal Provisions. -

(a) If the offender is a parent, ascendant, guardian, step-parent or collateral relative within the
third degree of consanguinity or affinity or any person having control or moral ascendancy over
the child, the penalty provided herein shall be in its maximum duration; Provided, That this
provision shall not apply to Section 4(g) of this Act;

(b) If the offender is a juridical person, the penalty shall be imposed upon the owner, manager,
partner, member of the board of directors and/or any responsible officer who participated in the
commission of the crime or shall have knowingly permitted or failed to prevent its commissions;

(c) If the offender is a foreigner, he/she shall be immediately deported after the complete service
of his/her sentence and shall forever be barred from entering the country; and

(d) The penalty provided for in this Act shall be imposed in its maximum duration if the offender
is a public officer or employee.

Section 17. Confiscation and Forfeiture of the Proceeds, Tools and Instruments Used in Child
Pornography. - In addition to the penalty imposed for the violation of this Act, the court shall order the
confiscation and forfeiture in favor of the government of all the proceeds, tools and instruments used in
the commission of the crime, unless they are the property of a third person not liable for the unlawful
act; Provided, however, That all awards for damages shall be taken from the personal and separate
properties of the offender; Provided, further, That if such properties are insufficient, the deficiency shall
be taken from the confiscated and forfeited proceeds, tools and instruments.

All proceeds derived from the sale of properties used for the commission of any form of child
pornography shall accrue to the special account of the DSWD which shall be used exclusively for the
implementation of this Act.

361
When the proceeds, tools and instruments used in the commission of the offense have been destroyed
diminished in value or otherwise rendered worthless by any act or omission, directly or indirectly, of the
offender, or it has been concealed, removed, converted or transferred to prevent the same from being
found or to avoid forfeiture or confiscation, the offender shall be ordered to pay the amount equal to the
value of the proceeds, tools and instruments used in the commission of the offense.1avvphi1

Section 18. Mandatory Services to Victims of Child Pornography. - To ensure recovery, rehabilitation
and reintegration into the mainstream of society concerned government agencies and the LGUs shall
make available the following services to victims of any form of child pornography:

(a) Emergency shelter or appropriate housing;

(b) Counseling;

(c) Free legal services, which shall include information about the victim's rights and the
procedure for filing of complaints, claims for compensation and such other legal remedies
available to them in a language understood by the child;

(d) Medical or psychological services;

(e) Livelihood and skills training; and

(f) Educational assistance.

Sustained supervision and follow through mechanism that will track the progress of recovery,
rehabilitation and reintegration of the child victims shall adopted and carried out.

Section 19. Programs for Victims of Child Pornography. The Inter-Agency Council Against Child
Pornography created under Section 20 of this Act shall develop and implement the necessary programs
that will prevent any form of child pornography, as well as protect, heal and reintegrate the child into the
mainstream of society. Such programs shall include beat but not limited to the following:

(a) Provision of mandatory services including counseling free legal services, medical or
psychological services, livelihood and skills training and educational assistance to the child
pursuant to Section 18 of this Act;

(b) Sponsorship of a national research program on any form of child pornography and other acts
covered by the law and the establishment of a data collection system for monitoring and
evaluation purposes;

(c) Provision of necessary technical and material support services to appropriate government
agencies and nongovernmental organizations:

(d) Sponsorship of conferences and seminars to provide venue for consensus building amongst
the public, the academe , government, nongovernmental and international organizations and

(e) Promotion of information and education campaign.

362
Section 20. Inter - Agency Council against Child Pornography. - There is hereby established an Inter-
Agency Council against Child Pornography to be composed of the Secretary of the DSWD as chairperson
and the following as members:

(a) Secretary of the Department of Justice:

(b) Secretary of the Department of Labor and Employment

(c) Secretary of the Department of Science and Technology

(d) Chief of the Philippine National Police;

(e) Chairperson of the Commission on Information and Communications Technology;

(g) Commissioner of the National Telecommunications Commission;

(h) Executive Director of the Council for the Welfare of Children;

(i) Executive Director of the Philippine Center for Transnational Crimes;

(j) Executive Director of the Optical Media Board;

(k) Director of the National Bureau of Investigation; and

(l) Three (3) representatives from children's nongovernmental organizations. These

representatives shall be nominated by the government agency representatives of the Council for
appointment by the President for a term of three (3) years and may be renewed upon
renomination and reappointment by the Council and the President respectively.

The members of the Council mat designate their permanent representatives, who shall have a rank not
lower than assistant secretary or its equivalent, to meetings and shall receive emoluments as may be
determined by the Council in accordance with existing budget and accounting rules and regulations.

The DSWD shall establish the necessary Secretariat for the Council.

Section 21. Functions of the Council. - The Council shall have the following powers and functions:

(a) Formulate comprehensive and integrated plans and programs to prevent and suppress any
form of child pornography;

(b) Promulgate rules and regulations as may be necessary for the effective implementation of this
Act;

(c) Monitor and oversee the strict implementation of this Act;

(d) Coordinate the programs and projects of the various members agencies effectively address the
issues and problems attendant to child pornography;

363
 (e) Conduct and coordinate massive information disseminations and campaign on the existence of
the law and the various issues and problems attendant to child pornography;

(f) Direct other agencies to immediately respond to the problems brought to their attention and
report to the Council on the action taken;

(g) Assist in the filling of cases against individuals, agencies, institutions or establishments that
violate the provisions of this Act;

(h) Formulate a program for the reintegration of victims of child pornography;

(i) Secure from any department, bureau, office, agency or instrumentality of the government or
from NGOs and other civic organizations such assistance as may be needed to effectively
implement this Act;

(j) Complement the shared government information system relative to child abuse and
exploitation and ensure that the proper agencies conduct a continuing research and study on the
patterns and schemes of any form of child pornography which form basis for policy formulation
and program direction;

(k) develop the mechanism to ensure the timely, coordinated and effective response to cases of
child pornography;

(l) Recommend measures to enhance cooperative efforts and mutual assistance among foreign
countries through bilateral and/or multilateral arrangements to prevent and suppress any form of
child pornography;

(m) Adopt measures and policies to protect the rights and needs of the victims of child
pornography who are foreign nationals in the Philippines;

(n) maintain a database of cases of child pornography;

(o) Initiate training programs in identifying and providing the necessary intervention or assistance
to victims of child pornography.

(p) Submit to the President and the Congressional Oversight committee credited herein the annual
report on the policies, plans, programs and activities of the Council relative to the implementation
of this Act; and

(q) Exercise all the powers and perform such other functions necessary to attain the purposes and
objectives of this Act.

Section 22. Child Pornography as a Transnational Crime. - Pursuant to the Convention on transnational
Organized Crime, the DOJ may execute the request of a foreign state for assistance in the investigation or
prosecution of any form of child pornography by: (1) conducting a preliminary investigation against the
offender and, if appropriate, to file the necessary charges in court; (2) giving information needed by the
foreign state; and (3) to apply for an order of forfeiture of any proceeds or monetary instrument or
properly located in the Philippines used in connection with child pornography in the court; Provided, That

364
if the DOJ refuses to act on the request of for delaying the execution thereof: Provided, further, That the
principles of mutuality and reciprocity shall, for this purpose, be at all times recognized.

Section 23. Extradition. - The DOJ, in consultation with the Department of Foreign Affairs (DFA), shall
endeavor to include child pornography among extraditable offenses in future treaties.

Section 24. Congressional Oversight Committee. -There is hereby created a Congressional Oversight
Committee composed of five (5) members from the Senate and five (5) members from the House of
Representatives. The members from the Senate shall be appointed by the Senate President based on
proportional representation of the parties or coalition therein with at least one (1) member representing
the Minority. The members from the House of Representative shall be appointed by the Speaker, also
based on proportional representation of the parties or coalitions therein with the Chair of the House of
Committee on Welfare of Children and at least one (1) member representing the Minority

The Committee shall be headed by the respective Chairs of the Senate Committee on Youth, Women and
Family relations and the House of Representatives Committee on Justice. The Secretariat of the
Congressional Oversight Committee shall come from the existing Secretariat personnel of the
Committees of the Senate and the House of Representatives concerned.

The Committee shall monitor and ensure the effective implementation of this Act, determine inherent
weakness and loopholes in the law. Recommend the necessary remedial legislator or administrative
measures and perform such other duties and functions as may be necessary to attain the objectives of this
Act.

Section 25. Appropriations. - The amount necessary to implement the provisions of the Anti-Child
Pornography Act and the operationalization of the Inter-Agency Council Against Child Pornography shall
be included in the annual General Appropriations Act.

Section 26. Implementing Rules and Regulations. - The Inter- Agency Council Against Child
pornography shall promulgate the necessary implementing rules and regulations within ninety (90) days
from the effectivity of this Act.

Section 27. Suppletory Application of the Revised Penal Code. - The Revised penal Code shall be
suppletorily applicable to this Act.

Section 28. Separability Clause. - If any part of this Act is declared unconstitutional or invalid, the other
provisions not affected thereby shall continue to be in full force and effect.

Section 29. Repealing Clause. - All laws, presidential decrees, executive orders, administrative orders,
rules and regulations inconsistent with or contrary to the provisions of this Act are deemed amended,
modified or repealed accordingly.

Section 30. Effectivity. - This Act shall effect after fifteen (15) days following its complete publication in
the Official Gazette or in at least two (2) newspapers of general circulation.

Approved,

PROSPERO C. NOGRALES JUAN PONCE ENRILE

Speaker of the House of Representatives President of the Senate

365
This Act which is a consolidation of Senate Bill No. 2317 and House Bill No. 6440 was finally passed by
the Senate and the House of Representatives on October 13, 2009.

MARILYN B. BARUA-YAP
EMMA LIRIO-REYES
Secretary General
Secretary of the Senate
House of the Representatives

Approved: November 17, 2009

Sgd. GLORIA MACAPAGAL-ARROYO

President of the Philippines

366
PRESIDENTIAL DECREE No. 115 January 29, 1973

PROVIDING FOR THE REGULATION OF TRUST RECEIPTS TRANSACTIONS

WHEREAS, the utilization of trust receipts, as a convenient business device to assist importers and
merchants solve their financing problems, had gained popular acceptance in international and domestic
business practices, particularly in commercial banking transactions;

WHEREAS, there is no specific law in the Philippines that governs trust receipt transactions, especially
the rights and obligations of the parties involved therein and the enforcement of the said rights in case of
default or violation of the terms of the trust receipt agreement;

WHEREAS, the recommendations contained in the report on the financial system which have been
accepted, with certain modifications by the monetary authorities included, among others, the enactment of
a law regulating the trust receipt transactions;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution, as Commander-in-Chief of all the Armed Forces of the
Philippines, and pursuant to Proclamation No. 1081, dated September 21, 1972, and General Order No. 1,
dated September 22, 1972, as amended, and in order to effect the desired changes and reforms in the
social, economic, and political structure of our society, do hereby order and decree and make as part of
the law of the land the following:

Section 1. Short Title. This Decree shall be known as the Trust Receipts Law.

Section 2. Declaration of Policy. It is hereby declared to be the policy of the state (a) to encourage and
promote the use of trust receipts as an additional and convenient aid to commerce and trade; (b) to
provide for the regulation of trust receipts transactions in order to assure the protection of the rights and
enforcement of obligations of the parties involved therein; and (c) to declare the misuse and/or
misappropriation of goods or proceeds realized from the sale of goods, documents or instruments released
under trust receipts as a criminal offense punishable under Article Three hundred and fifteen of the
Revised Penal Code.

Section 3. Definition of terms. As used in this Decree, unless the context otherwise requires, the term

(a) "Document" shall mean written or printed evidence of title to goods.

(b) "Entrustee" shall refer to the person having or taking possession of goods, documents or
instruments under a trust receipt transaction, and any successor in interest of such person for the
purpose or purposes specified in the trust receipt agreement.

(c) "Entruster" shall refer to the person holding title over the goods, documents, or instruments
subject of a trust receipt transaction, and any successor in interest of such person.

(d) "Goods" shall include chattels and personal property other than: money, things in action, or
things so affixed to land as to become a part thereof.

(e) "Instrument" means any negotiable instrument as defined in the Negotiable Instrument Law;
any certificate of stock, or bond or debenture for the payment of money issued by a public or

367
 private corporation, or any certificate of deposit, participation certificate or receipt, any credit or
investment instrument of a sort marketed in the ordinary course of business or finance, whereby
the entrustee, after the issuance of the trust receipt, appears by virtue of possession and the face of
the instrument to be the owner. "Instrument" shall not include a document as defined in this
Decree.

(f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or pledge, legal or
equitable.

(g) "Purchaser" means any person taking by purchase.

(h) "Security Interest" means a property interest in goods, documents or instruments to secure
performance of some obligations of the entrustee or of some third persons to the entruster and
includes title, whether or not expressed to be absolute, whenever such title is in substance taken
or retained for security only.

(i) "Person" means, as the case may be, an individual, trustee, receiver, or other fiduciary,
partnership, corporation, business trust or other association, and two more persons having a joint
or common interest.

(j) "Trust Receipt" shall refer to the written or printed document signed by the entrustee in favor
of the entruster containing terms and conditions substantially complying with the provisions of
this Decree. No further formality of execution or authentication shall be necessary to the validity
of a trust receipt.

(k) "Value" means any consideration sufficient to support a simple contract.

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the meaning of
this Decree, is any transaction by and between a person referred to in this Decree as the entruster, and
another person referred to in this Decree as entrustee, whereby the entruster, who owns or holds absolute
title or security interests over certain specified goods, documents or instruments, releases the same to the
possession of the entrustee upon the latter's execution and delivery to the entruster of a signed document
called a "trust receipt" wherein the entrustee binds himself to hold the designated goods, documents or
instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or
instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the
amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments
themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions
specified in the trust receipt, or for other purposes substantially equivalent to any of the following:

1. In the case of goods or documents, (a) to sell the goods or procure their sale; or (b) to
manufacture or process the goods with the purpose of ultimate sale: Provided, That, in the case of
goods delivered under trust receipt for the purpose of manufacturing or processing before its
ultimate sale, the entruster shall retain its title over the goods whether in its original or processed
form until the entrustee has complied fully with his obligation under the trust receipt; or (c) to
load, unload, ship or tranship or otherwise deal with them in a manner preliminary or necessary to
their sale; or

2. In the case of instruments,

a) to sell or procure their sale or exchange; or

368
 b) to deliver them to a principal; or

c) to effect the consummation of some transactions involving delivery to a depository or

register; or

d) to effect their presentation, collection or renewal

The sale of goods, documents or instruments by a person in the business of selling goods,
documents or instruments for profit who, at the outset of the transaction, has, as against the buyer,
general property rights in such goods, documents or instruments, or who sells the same to the
buyer on credit, retaining title or other interest as security for the payment of the purchase price,
does not constitute a trust receipt transaction and is outside the purview and coverage of this
Decree.

Section 5. Form of trust receipts; contents. A trust receipt need not be in any particular form, but every
such receipt must substantially contain (a) a description of the goods, documents or instruments subject of
the trust receipt; (2) the total invoice value of the goods and the amount of the draft to be paid by the
entrustee; (3) an undertaking or a commitment of the entrustee (a) to hold in trust for the entruster the
goods, documents or instruments therein described; (b) to dispose of them in the manner provided for in
the trust receipt; and (c) to turn over the proceeds of the sale of the goods, documents or instruments to
the entruster to the extent of the amount owing to the entruster or as appears in the trust receipt or to
return the goods, documents or instruments in the event of their non-sale within the period specified
therein.

The trust receipt may contain other terms and conditions agreed upon by the parties in addition to those
hereinabove enumerated provided that such terms and conditions shall not be contrary to the provisions of
this Decree, any existing laws, public policy or morals, public order or good customs.

Section 6. Currency in which a trust receipt may be denominated. A trust receipt may be denominated in
the Philippine currency or any foreign currency acceptable and eligible as part of international reserves of
the Philippines, the provisions of existing law, executive orders, rules and regulations to the contrary
notwithstanding: Provided, however, That in the case of trust receipts denominated in foreign currency,
payment shall be made in its equivalent in Philippine currency computed at the prevailing exchange rate
on the date the proceeds of sale of the goods, documents or instruments held in trust by the entrustee are
turned over to the entruster or on such other date as may be stipulated in the trust receipt or other
agreements executed between the entruster and the entrustee.

Section 7. Rights of the entruster. The entruster shall be entitled to the proceeds from the sale of the
goods, documents or instruments released under a trust receipt to the entrustee to the extent of the amount
owing to the entruster or as appears in the trust receipt, or to the return of the goods, documents or
instruments in case of non-sale, and to the enforcement of all other rights conferred on him in the trust
receipt provided such are not contrary to the provisions of this Decree.

The entruster may cancel the trust and take possession of the goods, documents or instruments subject of
the trust or of the proceeds realized therefrom at any time upon default or failure of the entrustee to
comply with any of the terms and conditions of the trust receipt or any other agreement between the
entruster and the entrustee, and the entruster in possession of the goods, documents or instruments may,
on or after default, give notice to the entrustee of the intention to sell, and may, not less than five days
after serving or sending of such notice, sell the goods, documents or instruments at public or private sale,
and the entruster may, at a public sale, become a purchaser. The proceeds of any such sale, whether public

369
or private, shall be applied (a) to the payment of the expenses thereof; (b) to the payment of the expenses
of re-taking, keeping and storing the goods, documents or instruments; (c) to the satisfaction of the
entrustee's indebtedness to the entruster. The entrustee shall receive any surplus but shall be liable to the
entruster for any deficiency. Notice of sale shall be deemed sufficiently given if in writing, and either
personally served on the entrustee or sent by post-paid ordinary mail to the entrustee's last known
business address.

Section 8. Entruster not responsible on sale by entrustee. The entruster holding a security interest shall
not, merely by virtue of such interest or having given the entrustee liberty of sale or other disposition of
the goods, documents or instruments under the terms of the trust receipt transaction be responsible as
principal or as vendor under any sale or contract to sell made by the entrustee.

Section 9. Obligations of the entrustee. The entrustee shall (1) hold the goods, documents or instruments
in trust for the entruster and shall dispose of them strictly in accordance with the terms and conditions of
the trust receipt; (2) receive the proceeds in trust for the entruster and turn over the same to the entruster
to the extent of the amount owing to the entruster or as appears on the trust receipt; (3) insure the goods
for their total value against loss from fire, theft, pilferage or other casualties; (4) keep said goods or
proceeds thereof whether in money or whatever form, separate and capable of identification as property of
the entruster; (5) return the goods, documents or instruments in the event of non-sale or upon demand of
the entruster; and (6) observe all other terms and conditions of the trust receipt not contrary to the
provisions of this Decree.

Section 10. Liability of entrustee for loss. The risk of loss shall be borne by the entrustee. Loss of goods,
documents or instruments which are the subject of a trust receipt, pending their disposition, irrespective of
whether or not it was due to the fault or negligence of the entrustee, shall not extinguish his obligation to
the entruster for the value thereof.

Section 11. Rights of purchaser for value and in good faith. Any purchaser of goods from an entrustee
with right to sell, or of documents or instruments through their customary form of transfer, who buys the
goods, documents, or instruments for value and in good faith from the entrustee, acquires said goods,
documents or instruments free from the entruster's security interest.

Section 12. Validity of entruster's security interest as against creditors. The entruster's security interest in
goods, documents, or instruments pursuant to the written terms of a trust receipt shall be valid as against
all creditors of the entrustee for the duration of the trust receipt agreement.

Section 13. Penalty clause. The failure of an entrustee to turn over the proceeds of the sale of the goods,
documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or
as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or
disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa,
punishable under the provisions of Article Three hundred and fifteen, paragraph one (b) of Act Numbered
Three thousand eight hundred and fifteen, as amended, otherwise known as the Revised Penal Code. If
the violation or offense is committed by a corporation, partnership, association or other juridical entities,
the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other
officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising
from the criminal offense.

Section 14. Cases not covered by this Decree. Cases not provided for in this Decree shall be governed by
the applicable provisions of existing laws.

370
Section 15. Separability clause. If any provision or section of this Decree or the application thereof to any
person or circumstance is held invalid, the other provisions or sections hereof and the application of such
provisions or sections to other persons or circumstances shall not be affected thereby.

Section 16. Repealing clause. All Acts inconsistent with this Decree are hereby repealed.

Section 17. This Decree shall take effect immediately.

Done in the City of Manila, this 29th day of January, in the year of Our Lord, nineteen hundred and
seventy-three.

371
REPUBLIC ACT NO. 8975 November 7, 2000

AN ACT TO ENSURE THE EXPEDITIOUS IMPLEMENTATION AND COMPLETION OF

GOVERNMENT INFRASTRUCTURE PROJECTS BY PROHIBITING LOWER COURTS
FROM ISSUING TEMPORARY RESTRANING ORDERS. PRELIMINARY INJUNCTIONS OR
PRELIMINARY MANDATORY INJUNCTIONS, PROVIDING PENALTIES FOR
VIOLATIONS THEREOF, AND FOR OTHER PURPOSES.

Be it enacted by the Senate and House of Representatives of the Philippines Congress assembled:

Section 1. Declaration of Policy. - Article XII, Section 6 of the Constitution states that the use of property
bears a social function, and all economic agents shall contribute to the common good. Towards this end,
the State shall ensure the expeditious and efficient implementation and completion of government
infrastructure projects to avoid unnecessary increase in construction, maintenance and/or repair costs and
to immediately enjoy the social and economic benefits therefrom.

Section 2. Definition of Terms.

(a) National government projects" shall refer to all current and future national government
infrastructure, engineering works and service contracts, including projects undertaken by
government-owned and controlled corporations, all projects covered by Republic Act No. 6957,
as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law,
and other related and necessary activities such as site acquisition, supply and/or installation of
equipment and materials, implementation, construction, completion, operation, maintenance,
improvement, repair and rehabilitation, regardless of the source of funding.

(b) "Service contracts" shall refer to infrastructure contracts entered into by any department,
office or agency of the national government with private entities and non-government
organizations for services related or incidental to the functions and operations of the department,
office or agency concerned.

Section 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Mandatory

Injunctions. No court, except the Supreme Court, shall issue any temporary restraining order,
preliminary injunction or preliminary mandatory injunction against the government, or any of its
subdivisions, officials or any person or entity, whether public or private acting under the government
direction, to restrain, prohibit or compel the following acts:

(a) Acquisition, clearance and development of the right-of-way and/or site or location of any
national government project;

(b) Bidding or awarding of contract/ project of the national government as defined under Section
2 hereof;

(c) Commencement prosecution, execution, implementation, operation of any such contract or

project;1awphil.net

(d) Termination or rescission of any such contract/project; and

372
 (e) The undertaking or authorization of any other lawful activity necessary for such
contract/project.

This prohibition shall apply in all cases, disputes or controversies instituted by a private party, including
but not limited to cases filed by bidders or those claiming to have rights through such bidders involving
such contract/project. This prohibition shall not apply when the matter is of extreme urgency involving a
constitutional issue, such that unless a temporary restraining order is issued, grave injustice and
irreparable injury will arise. The applicant shall file a bond, in an amount to be fixed by the court, which
bond shall accrue in favor of the government if the court should finally decide that the applicant was not
entitled to the relief sought.

In after due hearing the court finds that the award of the contract is null and void, the court may, if
appropriate under the circumstances, award the contract to the qualified and winning bidder or order a
rebidding of the same, without prejudice to any liability that the guilty party may incur under existing
laws.

Section 4. Nullity of Writs and Orders. Any temporary restraining order, preliminary injunction or
preliminary mandatory injunction issued in violation of Section 3 hereof is void and of no force and
effect.

Section 5. Designation of Regional Trial Courts. - The Supreme Court may designate regional trial courts
to act as commissioners with the sole function of receiving facts of the case involving acquisition
clearance and development of right-of-way for government infrastructure projects. The designated
regional trial court shall within thirty (30) days from the date of receipt of the referral, forwards its
findings of facts to the Supreme Court for appropriate action.

Section 6. Penal Sanction. In addition to any civil and criminal liabilities he or she may incur under
existing laws, any judge who shall issue a temporary restraining order, preliminary injunction or
preliminary mandatory injunction in violation of Section 3 hereof, shall suffer the penalty of suspension
of at least sixty (60) days without pay.

Section 7. Issuance of Permits. Upon payment in cash of the necessary fees levied under Republic Act
No. 7160, as amended, otherwise known as the Local Government Code of 1991, the governor of the
province or mayor of a highly-urbanized city shall immediately issue the necessary permit to extract sand,
gravel and other quarry resources needed in government projects. The issuance of said permit shall
consider environmental laws, land use ordinances and the pertinent provisions of the Local Government
Code relating to environment.

Section 8. Separability Clause. - If any provision of this Act is declared unconstitutional or invalid, other
parts or provisions hereof not affected thereby shall continue to be of full force and effect.

Section 9. Repealing Clause. - All laws, decrees, including Presidential Decree No. 605, 1818 and
Republic Act No. 7160, as amended, orders, rules and regulations or parts thereof inconsistent with this
Act are hereby repealed or amended accordingly.

Section 10. Effectivity Clause. This Act shall take effect fifteen (15) days following its publication in at
least two (2) newspapers of general circulation.

Approved: November 7, 2000

373
(Sgd.)JOSEPH EJERCITO ESTRADA
President of the Philippines

374
REPUBLIC ACT NO. 8974 November 7, 2000

AN ACT TO FACILITATE THE ACQUISITION OF RIGHT-OF-WAY, SITE OR LOCATION

FOR NATIONAL GOVERNMENT INFRASTRUCTURE PROJECTS AND FOR OTHER
PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines Congress assembled:

Section 1. Declaration of Policy. - Article III, Section 9 of the Constitution states that private property
shall not be taken for public use without just compensation. Towards this end, the State shall ensure that
owners of real property acquired for national government infrastructure projects are promptly paid just
compensation.

Section 2. National Government Projects. - The term "national government projects" shall refer to all
national government infrastructure, engineering works and service contracts, including projects
undertaken by government-owned and controlled corporations,all projects covered by Republic Act No.
6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law,
and other related and necessary activities, such as site acquisition, supply and/or installation of equipment
and materials, implementation, construction, completion, operation, maintenance, improvement, repair,
and rehabilitation, regardless of the source of funding.

Section 3. Modes of Accounting Real Property. - The government may acquire real property needed as
right-of-way, site or location for any national government infrastructure project through donation,
negotiated sale, expropriation or any other mode of acquisition as provided by law.

Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real property
for the right-of-way or location for any national government infrastructure project through expropriation,
the appropriate implementing agency shall initiate the expropriation proceedings before the proper court
under the following guidelines:

(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall
immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent
(100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal
Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7
hereof;

(b) In provinces, cities, municipalities and other areas where there is no zonal valuation, the BIR is hereby
mandated within the period of sixty (60) days from the date of the expropriation case, to come up with a
zonal valuation for said area; and

(c) In case the completion of a government infrastructure project is of utmost urgency and importance,
and there is no existing valuation of the area concerned, the implementing agency shall immediately pay
the owner of the property its proffered value taking into consideration the standards prescribed in Section
5 hereof.

Upon compliance with the guidelines abovementioned, the court shall immediately issue to the
implementing agency an order to take possession of the property and start the implementation of the
project.

375
Before the court can issue a Writ of Possession, the implementing agency shall present to the court a
certificate of availability of funds from the proper official concerned.

In the event that the owner of the property contests the implementing agencys proffered value, the court
shall determine the just compensation to be paid the owner within sixty (60) days from the date of filing
of the expropriation case. When the decision of the court becomes final and executory, the implementing
agency shall pay the owner the difference between the amount already paid and the just compensation as
determined by the court.

Section 5. Standards for the Assessment of the Value of the Land Subject of Expropriation Proceedings or
Negotiated Sale. - In order to facilitate the determination of just compensation, the court may consider,
among other well-established factors, the following relevant standards:

(a) The classification and use for which the property is suited;

(b) The developmental costs for improving the land;

(c) The value declared by the owners;

(d) The current selling price of similar lands in the vicinity;

(e) The reasonable disturbance compensation for the removal and/or demolition of certain improvement
on the land and for the value of improvements thereon;

(f) This size, shape or location, tax declaration and zonal valuation of the land;

(g) The price of the land as manifested in the ocular findings, oral as well as documentary evidence
presented; and

(h) Such facts and events as to enable the affected property owners to have sufficient funds to acquire
similarly-situated lands of approximate areas as those required from them by the government, and thereby
rehabilitate themselves as early as possible.

Section 6. Guidelines for Negotiated Sale. - Should the implementing agency and the owner of the
property agree on a negotiated sale for the acquisition of right-of-way, site or location for any national
government infrastructure project, the standards prescribed under Section 5 hereof shall be used to
determine the fair market value of the property, subject to review and approval by the head of the agency
or department concerned.

Section 7. Valuation of Improvements and/or Structures. - The Department of Public Works and
Highways and other implementing agencies concerned, in coordination with the local government units
concerned in the acquisition of right-of-way, site or location for any national government infrastructure
project, are hereby mandated to adopt within sixty (60) days upon approval of this Act, the necessary
implementing rules and regulations for the equitable valuation of the improvements and/or structures on
the land to be expropriated.

Section 8. Ecological and Environmental Concerns. - In cases involving the acquisition of right-of-way,
site or location for any national government infrastructure project, the implementing agency shall take
into account the ecological and environmental impact of the project. Before any national government

376
project could be undertaken, the agency shall consider environmental laws, land use ordinances and all
pertinent provisions of Republic Act No. 7160, as amended, otherwise known as the Local Government
Code of 1991.

Section 9. Squatter Relocation. - The government through the National Housing Authority, in
coordination with the local government units and implementing agencies concerned, shall establish and
develop squatter relocation sites, including the provision of adequate utilities and services, in anticipation
of squatters that have to be removed from the right-of-way or site of future infrastructure projects.
Whenever applicable, the concerned local government units shall provide and administer the relocation
sites.

In case the expropriated land is occupied by squatters, the court shall issue the necessary " Writ of
Demolition" for the purpose of dismantling any and all structures found within the subject property. The
implementing agency shall take into account and observe diligently the procedure provided for in
Sections 28 and 29 of Republic Act No. 7279, otherwise known as the Urban Development and Housing
Act of 1992.

Funds for the relocation sites shall come from appropriations for the purpose under the General
Appropriations Act, as well as from appropriate infrastructure projects funds of the implementing agency
concerned.

Section 10. Appropriations for Acquisitions of Right-of -Way, Site or Location for Any National
Government Infrastructure Project in Advance of Project Implementation. - The government shall
provide adequate appropriations that will allow the concerned implementing agencies to acquire the
required right-of-way, site or location for any national government infrastructure project.

Section 11. Sanctions. - Violation of any provisions of this Act shall subject the government official or
employee concerned to appropriate administrative, civil and/or criminal sanctions, including suspension
and/or dismissal from the government service and forfeiture of benefits.

Section 12. Rules and Regulations. - A committee composed of theSecretary of the Department of Public
Works and Highways as chairperson, and the secretaries of the Department of Transportation and
Communications, the Department of Energy, and the Department of Justice, and the presidents of the
leagues of provinces, cities and municipalities as members shall prepare the necessary rules and
regulations for the proper implementation of this Act within sixty (60) days from its approval.

Section 13. Separability Clause. - If any provision of this Act is declared unconstitutional or invalid,
other parts or provisions hereof not affected shall continue to be in full force and effect.

Section 14. Repealing Clause. - All laws, decrees, orders, rules and regulations or parts thereof
inconsistent with this Act are hereby repealed or amended accordingly.

Section 15. Effectivity Clause. - This Act shall take effect fifteen (15) days following its publication in at
least two (2) newspapers of general circulation.

Approved: November 7, 2000

377
(Sgd.)JOSEPH EJERCITO ESTRADA
President of the Philippines

378
 Republic of the Philippines
SUPREME COURT
Manila

A.M. No. 12-8-8-SC

JUDICIAL AFFIDAVIT RULE

Whereas, case congestion and delays plague most courts in cities, given the huge volume of cases filed
each year and the slow and cumbersome adversarial syste1n that the judiciary has in place;

Whereas, about 40% of criminal cases are dismissed annually owing to the fact that complainants simply
give up con1ing to court after repeated postponements;

Whereas, few foreign businessmen make long-term investments in the Philippines because its courts are
unable to provide ample and speedy protection to their investments, keeping its people poor;

Whereas, in order to reduce the time needed for completing the testimonies of witnesses in cases under
litigation, on February 21, 2012 the Supreme Court approved for piloting by trial courts in Quezon City
the compulsory use of judicial affidavits in place of the direct testimonies of witnesses;

Whereas, it is reported that such piloting has quickly resulted in reducing by about two-thirds the time
used for presenting the testimonies of witnesses, thus speeding up the hearing and adjudication of cases;

Whereas, the Supreme Court Committee on the Revision of the Rules of Court, headed by Senior
Associate Justice Antonio T. Carpio, and the Sub-Committee on the Revision of the Rules on Civil
Procedure, headed by Associate Justice Roberto A. Abad, have recommended for adoption a Judicial
Affidavit Rule that will replicate nationwide the success of the Quezon City experience in the use of
judicial affidavits; and

Whereas, the Supreme Court En Banc finds merit in the recommendation;

NOW, THEREFORE, the Supreme Court En Banc hereby issues and promulgates the following:

Section 1. Scope. - (a) This Rule shall apply to all actions, proceedings, and incidents requiring the
reception of evidence before:

(1) The Metropolitan Trial Courts, the Municipal Trial Courts in Cities, the Municipal
Trial Courts, the Municipal Circuit Trial Courts, and the Shari' a Circuit Courts but shall
not apply to small claims cases under A.M. 08-8-7-SC;

(2) The Regional Trial Courts and the Shari'a District Courts;

(3) The Sandiganbayan, the Court of Tax Appeals, the Court of Appeals, and the Shari'a
Appellate Courts;

(4) The investigating officers and bodies authorized by the Supreme Court to receive
evidence, including the Integrated Bar of the Philippine (IBP); and

379
 (5) The special courts and quasi-judicial bodies, whose rules of procedure are subject to
disapproval of the Supreme Court, insofar as their existing rules of procedure contravene
the provisions of this Rule.1

(b) For the purpose of brevity, the above courts, quasi-judicial bodies, or investigating officers
shall be uniformly referred to here as the "court."

Section 2. Submission of Judicial Affidavits and Exhibits in lieu of direct testimonies. - (a) The parties
shall file with the court and serve on the adverse party, personally or by licensed courier service, not later
than five days before pre-trial or preliminary conference or the scheduled hearing with respect to motions
and incidents, the following:

(1) The judicial affidavits of their witnesses, which shall take the place of such witnesses'
direct testimonies; and

(2) The parties' docun1entary or object evidence, if any, which shall be attached to the
judicial affidavits and marked as Exhibits A, B, C, and so on in the case of the
complainant or the plaintiff, and as Exhibits 1, 2, 3, and so on in the case of the
respondent or the defendant.

(b) Should a party or a witness desire to keep the original document or object evidence in his
possession, he may, after the same has been identified, marked as exhibit, and authenticated,
warrant in his judicial affidavit that the copy or reproduction attached to such affidavit is a
faithful copy or reproduction of that original. In addition, the party or witness shall bring the
original document or object evidence for comparison during the preliminary conference with the
attached copy, reproduction, or pictures, failing which the latter shall not be admitted.

This is without prejudice to the introduction of secondary evidence in place of the original when allowed
by existing rules.

Section 3. Contents of judicial Affidavit. - A judicial affidavit shall be prepared in the language known to
the witness and, if not in English or Filipino, accompanied by a translation in English or Filipino, and
shall contain the following:

(a) The name, age, residence or business address, and occupation of the witness;

(b) The name and address of the lawyer who conducts or supervises the examination of the
witness and the place where the examination is being held;

(c) A statement that the witness is answering the questions asked of him, fully conscious that he
does so under oath, and that he may face criminal liability for false testimony or perjury;

(d) Questions asked of the witness and his corresponding answers, consecutively numbered, that:

(1) Show the circumstances under which the witness acquired the facts upon which he
testifies;

(2) Elicit from him those facts which are relevant to the issues that the case presents; and

380
 (3) Identify the attached documentary and object evidence and establish their authenticity
in accordance with the Rules of Court;

(e) The signature of the witness over his printed name; and

(f) A jurat with the signature of the notary public who administers the oath or an officer who is
authorized by law to administer the same.

Section 4. Sworn attestation of the lawyer. - (a) The judicial affidavit shall contain a sworn attestation at
the end, executed by the lawyer who conducted or supervised the examination of the witness, to the effect
that:

(1) He faithfully recorded or caused to be recorded the questions he asked and the
corresponding answers that the witness gave; and

(2) Neither he nor any other person then present or assisting him coached the witness
regarding the latter's answers.

(b) A false attestation shall subject the lawyer mentioned to disciplinary action, including
disbarment.

Section 5. Subpoena. - If the government employee or official, or the requested witness, who is neither
the witness of the adverse party nor a hostile witness, unjustifiably declines to execute a judicial affidavit
or refuses without just cause to make the relevant books, documents, or other things under his control
available for copying, authentication, and eventual production in court, the requesting party may avail
himself of the issuance of a subpoena ad testificandum or duces tecum under Rule 21 of the Rules of
Court. The rules governing the issuance of a subpoena to the witness in this case shall be the same as
when taking his deposition except that the taking of a judicial affidavit shal1 be understood to be ex parte.

Section 6. Offer of and objections to testimony in judicial affidavit. - The party presenting the judicial
affidavit of his witness in place of direct testimony shall state the purpose of such testimony at the start of
the presentation of the witness. The adverse party may move to disqualify the witness or to strike out his
affidavit or any of the answers found in it on ground of inadmissibility. The court shall promptly rule on
the motion and, if granted, shall cause the marking of any excluded answer by placing it in brackets under
the initials of an authorized court personnel, without prejudice to a tender of excluded evidence under
Section 40 of Rule 132 of the Rules of Court.

Section 7. Examination of the witness on his judicial affidavit. - The adverse party shall have the right to
cross-examine the witness on his judicial affidavit and on the exhibits attached to the same. The party
who presents the witness may also examine him as on re-direct. In every case, the court shall take active
part in examining the witness to determine his credibility as well as the truth of his testimony and to elicit
the answers that it needs for resolving the issues.

Section 8. Oral offer of and objections to exhibits. - (a) Upon the termination of the testimony of his last
witness, a party shall immediately make an oral offer of evidence of his documentary or object exhibits,
piece by piece, in their chronological order, stating the purpose or purposes for which he offers the
particular exhibit.

381
 (b) After each piece of exhibit is offered, the adverse party shall state the legal ground for his
objection, if any, to its admission, and the court shall immediately make its ruling respecting that
exhibit.

(c) Since the documentary or object exhibits form part of the judicial affidavits that describe and
authenticate them, it is sufficient that such exhibits are simply cited by their markings during the
offers, the objections, and the rulings, dispensing with the description of each exhibit.

Section 9. Application of rule to criminal actions. - (a) This rule shall apply to all criminal actions:

(1) Where the maximum of the imposable penalty does not exceed six years;

(2) Where the accused agrees to the use of judicial affidavits, irrespective of the penalty
involved; or

(3) With respect to the civil aspect of the actions, whatever the penalties involved are.

(b) The prosecution shall submit the judicial affidavits of its witnesses not later than five days
before the pre-trial, serving copies if the same upon the accused. The complainant or public
prosecutor shall attach to the affidavits such documentary or object evidence as he may have,
marking them as Exhibits A, B, C, and so on. No further judicial affidavit, documentary, or object
evidence shall be admitted at the trial.

(c) If the accused desires to be heard on his defense after receipt of the judicial affidavits of the
prosecution, he shall have the option to submit his judicial affidavit as well as those of his
witnesses to the court within ten days from receipt of such affidavits and serve a copy of each on
the public and private prosecutor, including his documentary and object evidence previously
marked as Exhibits 1, 2, 3, and so on. These affidavits shall serve as direct testimonies of the
accused and his witnesses when they appear before the court to testify.

Section 10. Effect of non-compliance with the judicial Affidavit Rule. - (a) A party who fails to submit the
required judicial affidavits and exhibits on time shall be deemed to have waived their submission. The
court may, however, allow only once the late submission of the same provided, the delay is for a valid
reason, would not unduly prejudice the opposing party, and the defaulting party pays a fine of not less
than P 1,000.00 nor more than P 5,000.00 at the discretion of the court.

(b) The court shall not consider the affidavit of any witness who fails to appear at the scheduled
hearing of the case as required. Counsel who fails to appear without valid cause despite notice
shall be deemed to have waived his client's right to confront by cross-examination the witnesses
there present.

(c) The court shall not admit as evidence judicial affidavits that do not conform to the content
requirements of Section 3 and the attestation requirement of Section 4 above. The court may,
however, allow only once the subsequent submission of the compliant replacement affidavits
before the hearing or trial provided the delay is for a valid reason and would not unduly prejudice
the opposing party and provided further, that public or private counsel responsible for their
preparation and submission pays a fine of not less than P 1,000.00 nor more than P 5,000.00, at
the discretion of the court.

382
Section 11. Repeal or modification of inconsistent rules. - The provisions of the Rules of Court and the
rules of procedure governing investigating officers and bodies authorized by the Supreme Court to receive
evidence are repealed or modified insofar as these are inconsistent with the provisions of this
Rule.1wphi1

The rules of procedure governing quasi-judicial bodies inconsistent herewith are hereby disapproved.

Section 12. Effectivity. - This rule shall take effect on January 1, 2013 following its publication in two
newspapers of general circulation not later than September 15, 2012. It shall also apply to existing cases.

Manila, September 4, 2012.

MARIA LOURDES P. A. SERENO

Chief Justice

ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE
ARTURO D. BRION
CASTRO
Associate Justice
Associate Justice

DISODADO M. PERLATA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR. JOSE P. PEREZ

Associate Justice Associate Justice

JOSE C. MENDOZA BIENVENIDO L. REYES

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

Footnotes

1
By virtue of the Supreme Court's authority under Section 5 (5), Article VIII, of the 1987
Constitution to disapprove rules of procedure of special courts and quasi-judicial bodies.

383
 Republic of the Philippines
SUPREME COURT
Manila

B.M. No. 2012 February 10, 2009

PROPOSED RULE ON MANDATORY LEGAL AID SERVICE FOR PRACTICING LAWYERS

RESOLUTION

Acting on the Memorandum dated January 27, 2009 of Justice Renato C. Corona re: Comment of the
Integrated Bar of the Philippines on our Suggested Revisions to the Proposed Rule of Mandatory Legal
Aid Service for Practicing Lawyers, the Court Resolved to APPROVE the same.

This Resolution shall take effect on July 1, 2009 following publication of the said Rule and its
implementing regulations in at least two (2) newpapers of general circulation.

February 10, 2009

REYNATO S. PUNO
Chief Justice
LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO
Associate Justice Associate Justice
ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice
RENATO C. CORONA CONCHITA CARPIO MORALES
Associate Justice Associate Justice
ADOLFO S. AZCUNA DANTE O. TINGA
Associate Justice Associate Justice
MINITA V. CHICO-NAZARIO PRESBITERO J. VELASCO, JR.
Associate Justice Associate Justice
ANTONIO EDUARDO B. NACHURA TERESITA J. LEONARDO-DE CASTRO
Associate Justice Associate Justice
ARTURO D. BRION DIOSDADO M. PERALTA
Associate Justice Associate Justice

384
 RULE ON MANDATORY LEGAL AID SERVICE

SECTION 1. Title. - This Rule shall be known as "The Rule on Mandatory Legal Aid Service."

SECTION 2. Purpose. - This Rule seeks to enhance the duty of lawyers to society as agents of social
change and to the courts as officers thereof by helping improve access to justice by the less privileged
members of society and expedite the resolution of cases involving them. Mandatory free legal service by
members of the bar and their active support thereof will aid the efficient and effective administration of
justice especially in cases involving indigent and pauper litigants.

SECTION 3. Scope. - This Rule shall govern the mandatory requirement for practicing lawyers to render
free legal aid services in all cases (whether, civil, criminal or administrative) involving indigent and
pauper litigants where the assistance of a lawyer is needed. It shall also govern the duty of other members
of the legal profession to support the legal aid program of the Integrated Bar of the Philippines.

SECTION 4. Definition of Terms. - For purposes of this Rule:

(a) Practicing lawyers are members of the Philippine Bar who appear for and in behalf of parties
in courts of law and quasi-judicial agencies, including but not limited to the National Labor
Relations Commission, National Conciliation and Mediation Board, Department of Labor and
Employment Regional Offices, Department of Agrarian Reform Adjudication Board and National
Commission for Indigenous Peoples. The term "practicing lawyers" shall exclude:

(i) Government employees and incumbent elective officials not allowed by law to
practice;

(ii) Lawyers who by law are not allowed to appear in court;

(iii) Supervising lawyers of students enrolled in law student practice in duly accredited
legal clinics of law schools and lawyers of non-governmental organizations (NGOs) and
peoples organizations (POs) like the Free Legal Assistance Group who by the nature of
their work already render free legal aid to indigent and pauper litigants and

(iv) Lawyers not covered under subparagraphs (i) to (iii) including those who are
employed in the private sector but do not appear for and in behalf of parties in courts of
law and quasi-judicial agencies.

(b) Indigent and pauper litigants are those defined under Rule 141, Section 19 of the Rules of
Court and Algura v. The Local Government Unit of the City of Naga (G.R. No.150135, 30
October 2006, 506 SCRA 81);

(c) Legal aid cases are those actions, disputes, and controversies that are criminal, civil and
administrative in nature in whatever stage wherein indigent and pauper litigants need legal
representation;

(d) Free legal aid services refer to appearance in court or quasi-judicial body for and in behalf of
an indigent or pauper litigant and the preparation of pleadings or motions. It shall also cover

385
 assistance by a practicing lawyer to indigent or poor litigants in court-annexed mediation and in
other modes of alternative dispute resolution (ADR). Services rendered when a practicing lawyer
is appointed counsel de oficio shall also be considered as free legal aid services and credited as
compliance under this Rule;

(e) Integrated Bar of the Philippines (IBP) is the official national organization of lawyers in the
country;

(f) National Committee on Legal Aid (NCLA) is the committee of the IBP which is specifically
tasked with handling legal aid cases;

(g) Committee on Bar Discipline (CBD) is the committee of the IBP which is specifically tasked
with disciplining members of the Bar;

(h) IBP Chapters are those chapters of the Integrated Bar of the Philippines located in the
different geographical areas of the country as defined in Rule 139-A and

(i) Clerk of Court is the Clerk of Court of the court where the practicing lawyer rendered free
legal aid services. In the case of quasi-judicial bodies, it refers to an officer holding an equivalent
or similar position.

The term shall also include an officer holding a similar position in agencies exercising quasi-
judicial functions, or a responsible officer of an accredited PO or NGO, or an accredited mediator
who conducted the court-annexed mediation proceeding.

SECTION 5. Requirements. -

(a) Every practicing lawyer is required to render a minimum of sixty (60) hours of free legal aid
services to indigent litigants in a year. Said 60 hours shall be spread within a period of twelve
(12) months, with a minimum of five (5) hours of free legal aid services each month. However,
where it is necessary for the practicing lawyer to render legal aid service for more than five (5)
hours in one month, the excess hours may be credited to the said lawyer for the succeeding
periods.

For this purpose, a practicing lawyer shall coordinate with the Clerk of Court for cases where he
may render free legal aid service. He may also coordinate with the IBP Legal Aid Chairperson of
the IBP Chapter to inquire about cases where he may render free legal aid service. In this
connection, the IBP Legal Aid Chairperson of the IBP Chapter shall regularly and actively
coordinate with the Clerk of Court.

The practicing lawyer shall report compliance with the requirement within ten (10) days of the
last month of each quarter of the year.

(b) A practicing lawyer shall be required to secure and obtain a certificate from the Clerk of Court
attesting to the number of hours spent rendering free legal aid services in a case.

The certificate shall contain the following information:

386
 (i) The case or cases where the legal aid service was rendered, the party or parties in the
said case(s) for whom the service was rendered, the docket number of the said case(s) and
the date(s) the service was rendered.

(ii) The number of hours actually spent attending a hearing or conducting trial on a
particular case in the court or quasi-judicial body.

(iii) The number of hours actually spent attending mediation, conciliation or any other
mode of ADR on a particular case.

(iv) A motion (except a motion for extension of time to file a pleading or for
postponement of hearing or conference) or pleading filed on a particular case shall be
considered as one (1) hour of service.

The Clerk of Court shall issue the certificate in triplicate, one (1) copy to be retained by
the practicing lawyer, one (1) copy to be retained by the Clerk of Court and one (1) copy
to be attached to the lawyer's compliance report.

(c) Said compliance report shall be submitted to the Legal Aid Chairperson of the IBP Chapter
within the courts jurisdiction. The Legal Aid Chairperson shall then be tasked with immediately
verifying the contents of the certificate with the issuing Clerk of Court by comparing the copy of
the certificate attached to the compliance report with the copy retained by the Clerk of Court.

(d) The IBP Chapter shall, after verification, issue a compliance certificate to the concerned
lawyer. The IBP Chapter shall also submit the compliance reports to the IBPs NCLA for
recording and documentation. The submission shall be made within forty-five (45) days after the
mandatory submission of compliance reports by the practicing lawyers.

(e) Practicing lawyers shall indicate in all pleadings filed before the courts or quasi-judicial
bodies the number and date of issue of their certificate of compliance for the immediately
preceding compliance period. Failure to disclose the required information would cause the
dismissal of the case and the expunction of the pleadings from the records.

(f) Before the end of a particular year, lawyers covered by the category under Section 4(a)(i) and
(ii), shall fill up a form prepared by the NCLA which states that, during that year, they are
employed with the government or incumbent elective officials not allowed by law to practice or
lawyers who by law are not allowed to appear in court.

The form shall be sworn to and submitted to the IBP Chapter or IBP National Office together
with the payment of an annual contribution of Two Thousand Pesos (P2,000). Said contribution
shall accrue to a special fund of the IBP for the support of its legal aid program.

(g) Before the end of a particular year, lawyers covered by the category under Section 4(a)(iii)
shall secure a certification from the director of the legal clinic or of the concerned NGO or PO to
the effect that, during that year, they have served as supervising lawyers in a legal clinic or
actively participated in the NGOs or POs free legal aid activities. The certification shall be
submitted to the IBP Chapter or IBP National Office.

(h) Before the end of a particular year, lawyers covered by the category under Section 4(a)(iv)
shall fill up a form prepared by the NCLA which states that, during that year, they are neither

387
 practicing lawyers nor covered by Section (4)(a)(i) to (iii). The form shall be sworn to and
submitted to the IBP Chapter or IBP National Office together with the payment of an annual
contribution of Four Thousand Pesos (P4,000) by way of support for the efforts of practicing
lawyers who render mandatory free legal aid services. Said contribution shall accrue to a special
fund of the IBP for the support of its legal aid program.

(i) Failure to pay the annual contribution shall subject the lawyer to a penalty of Two Thousand
Pesos (P2,000) for that year which amount shall also accrue to the special fund for the legal aid
program of the IBP.

SECTION 6. NCLA. -

(a) The NCLA shall coordinate with the various legal aid committees of the IBP local chapters for
the proper handling and accounting of legal aid cases which practicing lawyers can represent.

(b) The NCLA shall monitor the activities of the Chapter of the Legal Aid Office with respect to
the coordination with Clerks of Court on legal aid cases and the collation of certificates submitted
by practicing lawyers.

(c) The NCLA shall act as the national repository of records in compliance with this Rule.

(d) The NCLA shall prepare the following forms: certificate to be issued by the Clerk of Court
and forms mentioned in Section 5(e) and (g).

(e) The NCLA shall hold in trust, manage and utilize the contributions and penalties that will be
paid by lawyers pursuant to this Rule to effectively carry out the provisions of this Rule. For this
purpose, it shall annually submit an accounting to the IBP Board of Governors.

The accounting shall be included by the IBP in its report to the Supreme Court in connection with
its request for the release of the subsidy for its legal aid program.

SECTION 7. Penalties. -

(a) At the end of every calendar year, any practicing lawyer who fails to meet the minimum
prescribed 60 hours of legal aid service each year shall be required by the IBP, through the
NCLA, to explain why he was unable to render the minimum prescribed number of hours. If no
explanation has been given or if the NCLA finds the explanation unsatisfactory, the NCLA shall
make a report and recommendation to the IBP Board of Governors that the erring lawyer be
declared a member of the IBP who is not in good standing. Upon approval of the NCLAs
recommendation, the IBP Board of Governors shall declare the erring lawyer as a member not in
good standing. Notice thereof shall be furnished the erring lawyer and the IBP Chapter which
submitted the lawyers compliance report or the IBP Chapter where the lawyer is registered, in
case he did not submit a compliance report. The notice to the lawyer shall include a directive to
pay Four Thousand Pesos (P4,000) penalty which shall accrue to the special fund for the legal aid
program of the IBP.

(b) The "not in good standing" declaration shall be effective for a period of three (3) months from
the receipt of the erring lawyer of the notice from the IBP Board of Governors. During the said
period, the lawyer cannot appear in court or any quasi-judicial body as counsel. Provided,

388
 however, that the "not in good standing" status shall subsist even after the lapse of the three-
month period until and unless the penalty shall have been paid.

(c) Any lawyer who fails to comply with his duties under this Rule for at least three (3)
consecutive years shall be the subject of disciplinary proceedings to be instituted motu proprio by
the CBD. The said proceedings shall afford the erring lawyer due process in accordance with the
rules of the CBD and Rule 139-B of the Rules of Court. If found administratively liable, the
penalty of suspension in the practice of law for one (1) year shall be imposed upon him.

(d) Any lawyer who falsifies a certificate or any form required to be submitted under this Rule or
any contents thereof shall be administratively charged with falsification and dishonesty and shall
be subject to disciplinary action by the CBD. This is without prejudice to the filing of criminal
charges against the lawyer.

(e) The falsification of a certificate or any contents thereof by any Clerk of Court or by any
Chairperson of the Legal Aid Committee of the IBP local chapter where the case is pending or by
the Director of a legal clinic or responsible officer of an NGO or PO shall be a ground for an
administrative case against the said Clerk of Court or Chairperson. This is without prejudice to
the filing of the criminal and administrative charges against the malfeasor.

SECTION 8. Credit for Mandatory Continuing Legal Education (MCLE). - A lawyer who renders
mandatory legal aid service for the required number of hours in a year for the three year-period covered
by a compliance period under the Rules on MCLE shall be credited the following: two (2) credit units for
legal ethics, two (2) credit units for trial and pretrial skills, two (2) credit units for alternative dispute
resolution, four (4) credit units for legal writing and oral advocacy, four (4) credit units for substantive
and procedural laws and jurisprudence and six (6) credit units for such subjects as may be prescribed by
the MCLE Committee under Section 2(9), Rule 2 of the Rules on MCLE.

A lawyer who renders mandatory legal aid service for the required number of hours in a year for at least
two consecutive years within the three year-period covered by a compliance period under the Rules on
MCLE shall be credited the following: one (1) credit unit for legal ethics, one (1) credit unit for trial and
pretrial skills, one (1) credit unit for alternative dispute resolution, two (2) credit units for legal writing
and oral advocacy, two (2) credit units for substantive and procedural laws and jurisprudence and three
(3) credit units for such subjects as may be prescribed by the MCLE Committee under Section 2(g), Rule
2 of the Rules on MCLE.

SECTION 9. Implementing Rules. - The IBP, through the NCLA, is hereby given authority to
recommend implementing regulations in determining who are "practicing lawyers," what constitute "legal
aid cases" and what administrative procedures and financial safeguards which may be necessary and
proper in the implementation of this rule may be prescribed. It shall coordinate with the various legal
chapters in the crafting of the proposed implementing regulations and, upon approval by the IBP Board of
Governors, the said implementing regulations shall be transmitted to the Supreme Court for final
approval.

SECTION 10. Effectivity. - This Rule and its implementing rules shall take effect on July 1,2009 after
they have been published in two (2) newspapers of general circulation.

389