Reviewer in RFBT

Part 1
New Law Topics for CPA Board Exam October
2017

Contains:
 Insolvency Law
 Corporate Rehabilitation
 Bouncing Checks Law
 Securities Regulations Code
 Code of Corporate Governance
 PDIC Law
 Secrecy of Bank Deposits
 Unclaimed Balances Law

Batch Dobyvatel, CPA October 2017

kcbdeleon
INSOLVENCY LAW (Act No. 1956)
INSOLVENCY DEFINED
- Under the Insolvency Law, a person is
insolvent when his liabilities are more than
his assets.
- Under the Civil Code, a person is insolvent
when even though he possesses sufficient
assets to cover his liabilities, he is unable to
regularly pay said obligations as they fall
due.
- In general terms, it is the state wherein a
debtor, possessing sufficient property to
cover all his debts, be it an individual person,
be it a sociedad or corporation, foresees the
impossibility of meeting them when they
respectively fall due.
PHILOSOPHY BEHIND THE INSOLVENCY LAW
There are times when a person wants to pay his
debts but cannot pay them despite his efforts and
desire to do so. The philosophy behind the
Insolvency Law is to allow such debtor to turn over
all his assets, except those exempt from execution,
for distribution among his creditors and, thereafter,
to turn a new leaf in his economic life. Then he can
start anew without being bothered by his old
creditors.
SUSPENSION OF PAYMENTS (SOP) is the
postponement by court order of the payment of
debts of one who, while possessing sufficient
property to cover his debts, foresees the
impossibility of meeting them when they
respectively fall due.
PURPOSE & BASIS OF SOP
- The purpose of a suspension of payments is
to suspend or delay the payment of debts
the amount of which isn’t affected
although a postponement is declared
- The basis is the probability of the debtor’s
inability to meet his obligation when they
respectively fall due, despite the fact that he
has sufficient assets to cover all his liabilities.
STEPS IN SUSPENSION OF PAYMENTS
1. Filing of petition by the debtor
When a debtor is in the state of insolvency, he
may petition that he be declared in the state of
suspension of payments by the court, or the judge
thereof in vacation, of the province or of the city
in which he has resided for six months next
preceding the filing of his petition.
The petition must have an attached schedule and
inventory of:
a. Statement of debts and liabilities
b. Description of real and personal property
c. Verification
d. Proposed agreement requested with
Creditors
2. Issuance by the court of an order calling a
meeting of creditors
- The meeting must take place in not less
than 2 weeks nor more than 8 weeks from
the calling of such order
- The order must designate the day, hour,
and place of meeting of said creditors as
well as a newspaper of general circulation
published in the province or city in which the
petition is filed
- Said order shall further contain an absolute
injunction forbidding the petitioning debtor
from disposing in any manner of his property,
or making payments for expense, except
those in the ordinary course of the business.
3. Publication of the order and service of summons
- A copy of said order shall immediately be
published 1 by the clerk of said court.
- Copies of orders must also be sent to all the
creditors declared in the attachments to the
petition.
4. Meeting of creditors for the consideration of
the debtor’s proposition
- The presence of the creditors representing at
least three-fifths of the liabilities shall be
necessary for holding a meeting.
5. Approval of the creditors of the debtor’s
proposition
6. Objections, if any, to the decision which must
be made within 10 days following the meeting
GROUNDS FOR OBJECTION TO DECISION:
a. Defects in the call for the meeting, in the
holding thereof, and in and the deliberations
had thereat which prejudice the rights of the
creditors;
b. Fraudulent connivance between one or more
creditors and in debtor to vote in favor of the
proposed agreement;
c. Fraudulent conveyance of claims for the
purpose of obtaining a majority.
7. Issuance of order by the court directing
that the agreement be carried out in case the
decision is declared valid, or when no objection
to said decision has been presented.
KINDS OF INSOLVENCY
VOLUNTARY INSOLVENCY - an insolvent debtor
owing debts exceeding in amount in the sum of
P1000, may apply to be discharged from his debts
and liabilities by petition to the RTC of the province
or city in which he has resided for 6 months next
preceding the filing of the petition.
STEPS IN VOLUNTARY INSOLVENCY
a. Filing of the petition by the debtor praying
for the declaration of insolvency
b. Issuance of order of adjudication declaring
the petitioner insolvent
c. Publication and service of the order
d. Meeting of the creditors to elect the assignee in
insolvency
e. Conveyance of the debtor’s property by the clerk
of court to the assignee
f. Liquidation of the debtor’s assets and payment
of his debts
g. Composition, if agreed upon
h. Discharge of the debtor on his application,
except a corporation
i. Objection, if any, to the discharge
j. Appeal to the SC in certain cases
In voluntary insolvency, a debtor is deemed
insolvent upon filing of the petition. The filing of such
petition on the part of the debtor is considered an
admission of insolvency on his part.
In simple terms, it is called “voluntary” insolvency
because the debtor admits that he cannot pay his
obligations as they come due. He is declared
insolvent from the time he admits such (i.e.
submission of petition).
ASSIGNEE IN INSOLVENCY
- role is in a nature of a receiver.
- gathers all the assets of the debtor, and
proceeds to make the inventory. If he
discovers some properties of the debtor to be
in the possession of third parties, he must
take action to recover them. His main
function is to preserve the property and
convert the assets into cash to await the
order of the court for the payment of
approved claims.
INVOLUNTARY INSOLVENCY - an adjudication of
insolvency may be made by the petition of 3 or
more creditors, residents of the Philippines,
whose credits or demands accrued in the
Philippines, for the amount of which credits
or demands are in the aggregate of not less than
P1000.
NATURE OF INVOLUNTARY INSOLVENCY
PROCEEDINGS
- An involuntary insolvency isn’t a mere personal
action against the insolvent for the collection of
debts; but its purpose is to impound all of his
non-exempt property, to distribute it equitably
among his creditors and to release him from
further liability. It is an action in rem and action in
persona.
STEPS IN INVOLUNTARY INSOLVENCY
a. Filing of the petition by three or more creditors
b. Issuance of order requiring the debtor to show
cause why he shouldn’t be adjudged insolvent
c. Service of order to show cause
d. Filing of answer or motion to dismiss
e. Hearing of the case
f. Issuance of order or decision adjudging debtor
insolvent
g. Publication and service of order
h. Meeting of creditors for election of an
assignee in insolvency
i. Conveyance of debtor’s property by clerk of court
j. Liquidation of assets and payments of debts
k. Composition, if agreed upon
l. Discharge of the debtor on his application,
except a corporation
m. Objection if any to the discharge
n. Appeal to the SC in certain cases
END
CORPORATE REHABILITATION
(A.M. NO. 00-8-10-SC)
DEFINITION OF TERMS
"Administrative expenses" shall refer to those
expenses incurred in the ordinary course of
business of the debtor after the issuance of the stay
order, excluding interest payable to creditors.
"Affidavit of General Financial Condition" shall refer
to a verified statement on the general financial
condition of the debtor required in Section 2, Rule 4
of these Rules.
"Board of Directors" shall include the executive
committee or the management of a partnership or
association.
"Claim" shall include all claims or demands of
whatever nature or character against a debtor or its
property, whether for money or otherwise.
"Creditor" shall mean any holder of a Claim.
"Court" shall refer to the proper Regional Trial Court
designated to hear and decide the cases
contemplated under these Rules.
"Debtor" shall mean any corporation, partnership, or
association, whether supervised or regulated by the
Securities and Exchange Commission or other
government agencies, on whose behalf a petition for
rehabilitation has been filed under these Rules.
"Stockholder" shall include a member of a non-stock
corporation or association, in a partnership.
STAY ORDER
A stay order is sometimes essential to the
survival of a distressed company. A stay order keeps
at bay the pack of unhappy and understandably
impatient creditors and prevents them from tearing
apart and bringing about the certain death of the
helpless company.
If the court finds the petition to be sufficient in
form and substance, it shall, not later than five (5)
days from the filing of the petition, issue a Stay
Order:
(a) appointing a Rehabilitation Receiver and
fixing his bond;
(b) staying enforcement of all claims
(c) prohibiting the debtor from selling,
encumbering, transferring, or disposing in any
manner any of its properties except in the ordinary
course of business;
(d) prohibiting the debtor from making any
payment of its liabilities outstanding as at the date of
filing of the petition;
(e) prohibiting the debtor's suppliers of goods or
services from withholding supply of goods and
services in the ordinary course of business for as
long as the debtor makes payments for the services
and goods supplied after the issuance of the stay
order;
(f) directing the payment in full of all
administrative expenses incurred after the issuance
of the stay order;
(g) fixing the initial hearing on the petition not
earlier than forty five (45) days but not later than sixty
(60) days from the filing thereof;
(h) directing the petitioner to publish the Order in
a newspaper of general of general circulation in the
Philippines once a week for two (2) consecutive
weeks;
(i) directing all creditors and all interested parties
(including the SEC) to file and serve on the debtor a
verified comment on or opposition to the petition,
with supporting affidavits and documents, not later
than ten (10) days before the date of the initial
hearing and putting them on notice that their failure
to do so will bar them from participating in the
proceedings; and
(j) directing the creditors and interested parties
to secure from the court copies of the petition and its
annexes within such time as to enable themselves
to file their comment on or opposition to the petition
and to prepare for the initial hearing of the petition.
The petitioner shall immediately serve a copy of the
stay order on the Rehabilitation Receiver appointed
by the court, who shall manifest his acceptance or
non-acceptance of his appointment not later than
ten (10) days from receipt of the order.
Period of the Stay Order. - The stay order shall be
effective from the date of its issuance until the
dismissal of the petition or the termination of the
rehabilitation proceedings.
The petition shall be dismissal if no rehabilitation
plan is approved by the court upon the lapse of one
hundred eighty (180) days from the date of the initial
hearing. The court may grant an extension beyond
this period only if it appears by convincing and
compelling evidence that the debtor may
successfully be rehabilitated. In no instance,
however, shall the period for approving or
disapproving a rehabilitation plan exceed eighteen
(18) months from the date of filing of the petition.
REHABILITATION RECEIVER
The Rehabilitation Receiver shall not take over the
management and control of the debtor but shall
closely oversee and monitor the operations of the
debtor during the pendency of the proceedings, and
for this purpose shall have the powers, duties and
functions of a receiver under Presidential Decree
No. 902-A, as amended, and the Rules of Court.
The Rehabilitation Receiver shall be considered as
an officer of the court. He shall be primarily tasked
to study the best way to rehabilitate the debtor and
to ensure that the value of the debtor's property is
reasonably maintained pending the determination of
whether or not the debtor should be rehabilitated, as
well as implement the rehabilitation plan after its
approval.
REHABILITATION PLAN
The rehabilitation plan shall include
1. the desired business targets or goals and the
duration and coverage of the rehabilitation;
2. the terms and conditions of such
rehabilitation
3. the material financial commitments to
support the rehabilitation plan;
4. the means for the execution of the
rehabilitation plan
5. a liquidation analysis
6. such other relevant information
A petition for rehabilitation may be made by any
debtor who foresees the impossibility of meeting its
debts when they respectively fall due, or any creditor
or creditors holding at least twenty-five percent
(25%) of the debtor's total liabilities, may petition
the proper Regional Trial Court to have the debtor
placed under rehabilitation.
CONTENTS OF PETITION
The petition filed (5 copies) by the debtor must be
verified and must set forth with sufficient particularly
all the following material facts:
(a) the name and business of the debtor;
(b) the nature of the business of the debtor;
(c) the history of the debtor;
(d) the cause of its inability to pay its debts;
(e) all the pending actions or proceedings
known to the debtor and the courts or
tribunals where they are pending;
(f) threats or demands to enforce claims or
liens against the debtor; and
(g) the manner by which the debtor may be
rehabilitated and how such rehabilitation
may benefit the general body of creditors,
employees, and stockholders.
The petition shall be accompanied by the following
documents:
a. An audited financial statement of the debtor at
the end of its last fiscal year;
b. Interim financial statements as of the end of the
month prior to the filing of the petition;
c. Schedule of Debts and Liabilities
d. Any Inventory of Assets
e. A rehabilitation plan
f. A Schedule of Payments and disposition of
assets
g. A Schedule of the Cash Flow
h. A Statement of Possible Claims by or against the
debtor
i. An Affidavit of General Financial Condition
j. At least three (3) nominees for the position of
Rehabilitation Receiver
k. A Certificate attesting, under oath, that the
- filing of the petition has been duly authorized;
and
- the directors and stockholders have
irrevocably approved such petition
END
 BOUNCING CHECKS LAW (BP 22)
Checks without sufficient funds
Any person who makes or draws and issues
any check to apply on account or for value, knowing
at the time of issue that he does not have
sufficient funds in or credit with the drawee bank
for the payment of such check in full upon its
presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of
funds or credit or would have been dishonored for
the same reason had not the drawer, without any
valid reason, ordered the bank to stop payment,
shall be punished by:
- imprisonment of not less than thirty days but
not more than one (1) year or
- by a fine of not less than but not more than
double the amount of the check which fine
shall in no case exceed Two Hundred
Thousand Pesos,
- or both such fine and imprisonment at the
discretion of the court.
The same penalty shall be imposed upon
any Person who, having sufficient funds in or credit
with the drawee bank when he makes or draws and
issues a check, shall fail to keep sufficient funds
or to maintain a credit to cover the full amount of
the check if presented within a period of ninety
(90) days from the date appearing thereon, for which
reason it is dishonored by the drawee bank.
Where the check is drawn by a corporation,
company or entity, the person or persons who
actually signed the check in behalf of such drawer
shall be liable under this Act.
Evidence of knowledge of insufficient funds
General Rule:
The making, drawing and issuance of a check
payment of which is refused by the drawee because
of insufficient funds in or credit with such bank, when
presented within ninety (90) days from the date of
the check, shall be prima facie evidence of
knowledge of such insufficiency of funds or credit.
Exceptions:
- such maker or drawer pays the holder
thereof the amount due thereon, or
- makes arrangements for payment in full by
the drawee of such check within (5) banking
days after receiving notice that such check
has not been paid by the drawee.
Duty of the Drawee
- to cause to be written, printed, or stamped in
plain language thereon, or attached thereto,
the reason for drawee's dishonor or refusal
to pay the same
Where there are no sufficient funds in or credit with
such drawee bank, such fact shall always be
explicitly stated in the notice of dishonor or
refusal.
Not withstanding receipt of an order to stop payment,
the drawee shall state in the notice that there were
no sufficient funds in or credit with such bank for
the payment in full of such check, if such be the fact.
Credit construed
The word "credit" as used herein shall be construed
to mean an arrangement or understanding with the
bank for the payment of such check.
END
 SECURITIES REGULATION CODE
(R.A. 8799)
RATIONALE OF ENACTING THE SRC
- establish a socially conscious, free market
that regulates itself
- encourage the widest participation of
ownership in enterprises
- enhance the democratization of wealth
- promote the development of the capital
market
- protect investors
- ensure full and fair disclosure about
securities
- minimize if not totally eliminate insider
trading and other fraudulent or manipulative
devices and practices which create
distortions in the free market.
Securities - are shares, participation or interests in
a corporation or in a commercial enterprise or profit-
making venture and evidenced by a certificate,
contract, instruments, whether written or electronic
in character
Kinds of Securities
a. Debt Instruments - shares of stocks, bonds,
debentures, notes evidences
indebtedness, asset-backed securities;
b. Equity Instruments - shares of stock,
certificate of deposit for a future subscription,
proprietary or non-propriety membership
certificates in corporations;
c. Investment Instruments – investment
contracts, fractional undivided interests in oil,
gas or other mineral rights;
d. Derivatives - like options and warrants;
e. Trust Instruments - certificates
assignments, certificates of participation,
trust certificates, voting trust certificates or
similar certificates;
f. Catch-All - other instruments as may in the
future determined by the Commission
DEFINITION OF TERMS
"Issuer" is the originator, maker, obligor, or creator
of the security.
"Broker" is a person engaged in the business of
buying and selling securities for the account of
others.
"Dealer" means many person who buys sells
securities for his/her own account in the ordinary
course of business.
"Associated person of a broker or dealer" is an
employee therefor whom, directly exercises control
of supervisory authority, but does not include a
salesman, or an agent or a person whose functions
are solely clerical or ministerial.
"Clearing Agency" is any person who acts as
intermediary in making deliveries upon payment
effect settlement in securities transactions.
"Exchange" is an organized market place or facility
that brings together buyers and sellers and executes
trade of securities and/or commodities.
"Insider" means
(a) the issuer;
(b) a director or officer (or any person
of
performing similar functions) of, or a person
controlling the issuer;
(c) gives or gave him access to material
information about the issuer or the security that is
not generally available to the public;
(d) A government employee, director, or
officer of an exchange, clearing agency and/or self-
regulatory organization who has access to material
information about an issuer or a security that is not
generally available to the public; or
of
(e) a person who learns such information by
a communication from any forgoing insiders.
"Pre-need plans" are contracts which provide for the
performance of future services of or the payment of
future monetary considerations at the time actual
need, for which plan holders pay in cash or
installment at stated prices, with or without interest
or insurance coverage and includes life, pension,
education, interment, and other plans which the
Commission may from time to time approve.
"Promoter" is a person who, acting alone or with
others, takes initiative in founding and organizing the
business or enterprise of the issuer and receives
consideration therefor.
"Prospectus" is the document made by or an behalf
of an issuer, underwriter or dealer to sell or offer
securities for sale to the public through registration
statement filed with the Commission.
"Registration statement" is the application for the
registration of securities required to be filed with the
Commission.
"Salesman" is a natural person, employed as such
as an agent, by a dealer, issuer or broker to buy and
sell securities.
"Uncertificated security" is a security evidenced by
electronic or similar records.
"Underwriter" is a person who guarantees on a firm
commitment and/or declared best effort basis the
distribution and sale of securities of any kind by
another company.
TENDER OFFER
- A publicly announced intention by a
person acting alone or in concert with other
persons to acquire equity securities of a
“public company”.
- It is mandatory to make a tender offer for
equity shares of a public company in an
amount equal to the number of shares that
the person intends to acquire in the following
circumstances:
a. The person intends to acquire 15%or more
of the equity shares of a public company
pursuant to an agreement made between or
among the person and one or more sellers;
b. The person intends to acquire 30%or more
of the equity shares of a public company
within a period of 12 months; or
c. The person intends to acquire shares that
would result in ownership of more than 50%
of the equity shares of a public company.
Securities deposited may be withdrawn at any time
throughout the period that the tender offer remains
open and if deposited have not been previously
accepted for payment, and at any time after 60 days
from the date of the original tender offer or request
or invitation.
Unlawful and Prohibited Acts Relating to Tender
Offers:
 to make an untrue statement of a material
fact or omit to state any material fact in order
to make the statements made, not
misleading
 to engage in any fraudulent, deceptive, or
manipulative act or practices.
Unlawful Sale of Securities
It shall be unlawful for any such beneficial owner,
director, or officer, directly or indirectly, to sell any
equity security of such issuer if person selling
security or his principal:
a. does not own the security sold
b. if owning the security, does not deliver it
against such sale within 20 days
thereafter, or does not within 5 days after
such sale deposit it in the mails or other
usual channels of transportation.
Prohibition does NOT apply to a dealer in the
ordinary course of his business and incident to the
establishment or maintenance by him of a primary or
secondary market, otherwise than in an Exchange,
for such security.
INSIDER TRADING
- The selling or buying of a security by an
insider while in possession of material non-
public information with respect to the issuer
or the security.
- It is considered unlawful unless:
 1. The insider proves that the where applicable, the requirements of relevant
information was not gained from regulatory agencies.
such relationship; or (vi) Observe confidentiality.
2. If the other party selling to or buying
from the insider (or his agent) is FILING OF GIS AND AFS
identified, the insider proves:
a. that he disclosed the information
to the other party; or
b. that he had reason to believe that
the other party otherwise is also
in possession of the information.

Presumption:
A purchase or sale made by an insider, his spouse,
or relatives, shall be presumed to have been
effected while in possession of material non-public
information if transacted after such information came
into existence but prior to public dissemination of
such information.

CODE OF CORPORATE GOVERNANCE

Specific Duties and Responsibilities of a

Director
A director’s office is one of trust and confidence. A
director should act in the best interest of the
corporation in a manner characterized by
transparency, accountability and fairness. He should
also exercise leadership, prudence and integrity in
directing the corporation towards sustained
progress.

A director should observe the following norms
of conduct:
(i) Conduct fair business transactions with the
corporation, and ensure that his personal interest
does not conflict with the interests of the corporation.
(ii) Devote the time and attention necessary to
properly and effectively perform his duties and
responsibilities.
(iii) Act judiciously.
(iv) Exercise independent judgment.
(v) Have a working knowledge of the statutory and
regulatory requirements that affect the corporation,
including its articles of incorporation and by-laws,
the rules and regulations of the Commission and,
The GIS, AFS, General and Special FS reports
should be printed on an A4-sized (8.27”x11.69”)
bond paper under a standard cover page or sheet.
The original and all conformed pages should use
only one side of the paper.
GENERAL INFORMATION SHEET (GIS)
The GIS should be certified and sworn to by
the corporate secretary.
In the submission of the General Information
sheet (GIS), the 30- calendar day period shall be
counted from the date the annual stockholders’
meeting was actually held.
 If the corporation is unable to hold the
meeting for the calendar year, the GIS shall be filed
not later than January of the following year.
If the corporation is not in operation, it should
submit an Affidavit of Non-Operation within 120
calendar days after the end of the fiscal year as
specified in the by-laws, with the GIS and FS.
ANNUAL FINANCIAL STATEMENTS (AFS)
1) The FS of the following domestic corporations
shall be audited by an independent certified public
accountant (CPA) registered with the Board of
Accountancy:
a) stock corporations with paid-up capital of
PhP50,000.00 or more; and
b) non-stock corporations with annual gross
receipts of PhP100,000.00 or more, or total
assets of PhP50,000,000.00 or more
2) The FS of the following domestic corporations
shall, at the minimum, be certified under oath by the
treasurer of the corporation:
a) stock corporations with paid-up capital of
less than PhP50,000.00; and
b) non-stock corporations with annual gross
receipts of less than PhP100,000.00 or a
total assets of less than PhP500,000.00.
4) The FS of the following foreign corporations shall,
at the minimum, be certified under oath by the
treasurer of the of the corporation:
a) branch office of a stock foreign corporation
with assigned capital of less than PhP50,000.00;
b) branch office of a non-stock foreign
corporation with total assets of less than
PhP500,000.00;
c) representative office of a foreign
corporation with total assets of less than
PhP500,000.00;
d) regional operating headquarters of
multinational companies with assigned capital of
less than PhP500,000.00;
e) regional operating headquarters of
multinational companies with total assets of less
than PhP500,000.00
END

3) The FS of the following foreign corporations shall

be audited by an independent CFA registered with
the Board of Accountancy:
a) branch office of a stock foreign corporation
with total assets of PhP500,000.00 or more;
b) branch office of a non-stock foreign
corporation with total assets of PhP500,000.00 or
more;
c) representative office of a foreign
corporation with total assets of PhP500,000.00 or
more;
d) regional operating headquarters of
multinational companies with assigned capital of
PhP50,000.00 or more;
e) regional headquarters of multinational
companies with total assets of PhP50,000.00 or
more.
 PDIC LAW (R.A. 9576)
PDIC is a government instrumentality created in
1963 by virtue of Republic Act 3591 to insure the
deposits of all banks which are entitled to the
benefits of insurance. The latest amendments to RA
3591 are contained in RA 10846 signed into law on
May 23, 2016. RA 10846 empowered PDIC with
stronger authorities to protect the depositing public
and promote financial stability. The new law also
includes important provisions to ensure that the
PDIC remains financially and institutionally strong to
fulfill its mandate under its Charter.
The PDIC now has the authority to help depositors
have quicker access to their insured deposits should
their bank close; resolve problem banks while still
open; hasten the liquidation process for closed
banks; and mete out stiffer sanctions and penalties
against those who engage in unsafe and unsound
banking practices.
The PDIC is an attached agency of the Department
of Finance.
INSURED DEPOSITS
The term ‘insured deposit’ means the
amount due to any bona fide depositor for legitimate
deposits in an insured bank net of any obligation of
the depositor to the insured bank as of date of
closure, but not to exceed P500,000.00.
A joint account shall be insured separately from any
individually-owned deposit account.
Except for the exclusions stipulated in RA
9576, deposits of all commercial banks, savings and
mortgage banks, rural banks, private development
banks, cooperative banks, savings and loan
associations, as well as branches and agencies in
the Philippines of foreign banks and all other
corporations authorized to perform banking
functions in the Philippines, are insured with PDIC.
As for Philippine banks with branches
outside the country, RA 9576 stipulates that
subject to the approval of the Board of Directors, any
insured bank with branch outside the Philippines
may elect to include for insurance its deposit
obligations payable at such branch.
Foreign currency deposits are also
insured by PDIC pursuant to RA 6426 (“An act
instituting a foreign currency deposit system in the
Philippines, and for other purposes”) and Central
Bank (CB) Circular No. 1389. Depositors may
receive payment in the same currency in which the
insured deposit is denominated
R.A. No. 9576 stipulates that PDIC will not pay
deposit insurance for the following accounts or
transactions:
1. Investment products such as bonds,
securities and trust accounts;
2. Deposit accounts which are unfunded,
fictitious or fraudulent;
3. Deposit products constituting or
emanating from unsafe and unsound
banking practices;
4. Deposits that are determined to be
proceeds of an unlawful activity as
defined under the Anti-Money
Laundering Law.
MAXIMUM LIABILITY
Effective June 1, 2009, the maximum deposit
insurance coverage is P500,000 per depositor. All
deposit accounts by a depositor in a closed bank
maintained in the same right and capacity shall be
added together.
Under R.A. No. 9576, the PDIC may propose to
adjust the MDIC, subject to the approval of the
President of the Philippines, in case of a condition
that threatens the monetary and financial stability of
the banking system that may have systemic
consequences.
FILING OF CLAIMS
Who are NOT required to file claims?
Depositors with valid deposit accounts with balances
of Php100,000 and below are not required to file
claims provided they have no obligations with the
closed bank and have complete and updated
addresses in the bank records or have updated
these through the Mailing Address Update Form
(MAUF) issued by the PDIC.
When are claims filed?
Claims are filed during the claims settlement
operations period, as announced in the Notice to
Depositors published in national or local
newspapers.
Depositors have two (2) years from PDIC’s takeover
of the closed bank to file their deposit insurance
claims.
Who are REQUIRED to file claims?
1. Depositors with valid deposit accounts with
balances of more than Php100,000.
2. Depositors who have outstanding obligations with
the closed bank regardless of amount of deposits.
3. Depositors with account balances of less than
Php100,000 who have no updated addresses in the
bank records or who have not updated their
addresses through the Mailing Address Update
Form (MAUF) issued by the PDIC.
4. Depositors who maintain their accounts under the
name of business entities, regardless of type of
account and account balance.
5. Depositors with accounts not eligible for early
payment, regardless of type of account and account
balance per advice of PDIC.
WHO should sign the Claim Form?
1. DEPOSITOR of the account
- for depositors 18 years old and above
2. PARENT
- if the depositor is below 18 years old
3. AGENT
- in the case of “By” accounts
4. TRUSTEE
- in the case of “In Trust For (ITF)”
accounts
5. EACH DEPOSITOR
- in the case of joint accounts such as
“Or”, “And/Or” or “And” accounts
REQUIRED DOCUMENTS
- Original evidence of deposits such as
savings passbook, certificate of time deposit,
bank statement, unused checks, and ATM
card.
- Two (2) valid photo-bearing IDs with
signature of the depositor/claimant.
Relevant Notes
1. Claims should be filed within the two-year
prescriptive period after PDIC’s takeover of the
closed bank.
2. The PDIC will not accept claims that are
incomplete or lacking in requirements.
3. The PDIC may also require additional
documents in the course of claims processing.
4. The PDIC, as Receiver, has the authority to
adjust the interest rate on unpaid interests on
deposits if such rate is deemed unreasonably
higher compared to market rates.
5. The standard procedures for claims settlement
may not apply if the closed bank fails to properly
turn over to the PDIC the closed bank’s complete
records. Without the complete records, the PDIC
will not be able to conduct the validation process
for bank deposits, a requirement before deposit
insurance claims are paid.
END
SECRECY OF BANK DEPOSITS (R.A.
1405)
RATIONALE OF THE LAW:
1) The Government encourages people to
deposit their money in banking institutions,
and
2) Discourages private hoarding to help the
proper circulation of money in the country,
and aid in economic development.
It will aid in the efficiency of the banking system as
the money saved will be properly utilized to authorize
loans. It could also decrease government costs.
In relation to this, the government must secure the
confidentiality of citizens’ money. Thus, the provision
enacted.
THE PROVISION STATES:
General Rule/ Prohibited Acts:
1. the EXAMINATION AND INQUIRY OR
LOOKING into
o all deposits of whatever nature with
banks or banking institutions in the
Philippines (including investments in
bonds issued by the Governments or its
political subdivisions and
instrumentalities) by
- any person or
- any government official
- any bureau or
- any office
2. the DISCLOSURE by
- any OFFICIAL of any banking institution
or
- any EMPLOYEE of any banking
institution to ANY UNAUTHORIZED
PERSON of any information concerning
the said deposit
Precepts:
“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.”
Exceptions:
1. Upon the written permission of the depositor
2. In cases of impeachment
3. Upon the order of a competent court in cases
of bribery or dereliction of duty of public
officials
4. In cases where the money deposited or
invested is the subject matter of the litigation.
Other Exceptions not expressly mentioned:
 In case of violation of the anti-graft and
corrupt practice act;
 Violation of the unexplained wealth law
 Violation of the Anti-Money Laundering Law
 Garnishment
 Upon the order of the CIR in respect of the
bank deposits of a decedent for the purpose
of determining such decedent’s gross estate
 Upon the order of the Commissioner of
Internal Revenue in respect of the bank
deposits of a taxpayer who has filed an
application for compromise of his tax liability.
 Upon the order of the ombudsman
PENALTIES/SANCTIONS:
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.
Key Terms:
Private Hoarding - To accumulate as much of
(something) as one can, as when fearing a shortage.
Dereliction of Duty – when a person has willfully
refused to perform his duties (or follow a given order)
or has incapacitated himself in such a way that he
cannot perform his duties.
Deposits - refer to money or funds placed with bank
that can be withdrawn on the depositor’s order or
demand, such as deposit accounts in the form of
savings, current and time deposits.
Investments in government bonds - refer to
investments in bonds issued by the government and
its instrumentalities.
RA 1405 DOES NOT COVER:
1. Safety Deposit Boxes
2. Trust Funds
3. Money Market Placements. END
 UNCLAIMED BALANCES LAW A copy of the above sworn statement shall be posted
(R.A. 3936) in a conspicuous place in the premises of the bank,
building and loan association, or trust corporation
Amended by PD No. 679 concerned for at least sixty days from the date of
filing thereof.
Elements of Unclaimed Balances
It shall be the duty of the Treasurer of the Philippines
1. Includes credits or deposits of: to inform the Solicitor General from time to time
a. Money the existence of unclaimed balances held by banks,
b. Bullion building and loan associations, and trust
c. Security corporations.
d. Other evidence of indebtedness of any
kind, and interest thereon Whenever the Solicitor General shall be informed of
such unclaimed balances, he shall commence an
2. The credit or deposit is made with banks, action or actions in the name of the People of the
buildings and loan associations, and trust Republic of the Philippines in the Court of First
corporations Instance of the province or city where the bank,
building and loan association or trust corporation is
3. The credit or deposit is in favor of any person located.
known to be
a. dead or If the president, cashier or managing officer of the
b. who has not made further deposits or bank, building and loan association, or trust
withdrawals during the preceding ten corporation neglects or refuses to make and file the
years or more. sworn statement required by this action, such bank,
building and loan association, or trust corporation
Unclaimed Balances shall be forwarded to the shall pay to the Government the sum of five
Treasurer of the Philippines with a statement, hundred pesos a month for each month or fraction
under oath, showing the: thereof during which such default shall continue.

(a) The names and last known place of residence or END

post office addresses of the persons in whose favor
such unclaimed balances stand;

(b) The amount and the date of the outstanding

unclaimed balance and whether the same is in
money or in security, and if the latter, the nature of
the same;

(c) The date when the person in whose favor the

unclaimed balance stands died, if known, or the date
when he made his last deposit or withdrawal; and

(d) The interest due on such unclaimed balance, if

any, and the amount thereof.