General Banking Notes

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GENERAL BANKING NOTESSheila May M. Martinez1st homework

Section 1-11 General Banking Act LAw

CHAPTER ITITLE AND CLASSIFICATION OF BANKSSection 1. Title. The short title of this Actshall be The General Banking Law of 2000."(1a)

Sec. 2. Declaration Of Policy. - The Staterecognizes the vital role of banks providingan environment conducive to the sustaineddevelopment of the national economy and thefiduciary nature of banking that requires highstandards of integrity and performance. Infurtherance thereof, the State shall promoteand maintain a stable and efficient banking

and financial system that is globallycompetitive, dynamic and responsive to thedemands of a developing economy.

Sec. 3. Definition and Classification of Banks.

3.1. "Banks"shall refer to entities engaged in

the lending of funds obtained in the form ofdeposits.

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 inthe Republic Act No. 7906 (hereafterthe Thrift Banks Act );

(d) Rural banks, as defined in Republic Act No.73S3 (hereafter the "Rural Banks Act");

(e) Cooperative banks, as defined in RepublicAct No 6938 (hereafter the"CooperativeCode");

(f) Islamic banks as defined in Republic ActNo. 6848, otherwise known as the Charter ofAl Amanah Islamic Investment Bank of the

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Philippines; and

(g) Other classifications of banks as determinedby the Monetary Board of the Bangko Sentralng Pilipinas.

CHAPTER IIAUTHORITY OF THE BANGKO SENTRAL

Sec. 4. Supervisory Powers. The operationsand activities of banks shall be subject to

supervision of the BangkoSentral. Supervision shall include thefollowing:

4.1. The issuance of rules of, conduct or theestablishment standards of operation foruniform application to all institutions orfunctions covered, taking into considerationthe distinctive character of the operations of

institutions and the substantive similarities ofspecific functions to which such rules, modesor standards are to be applied;

4.2.The conduct of examination to determinecompliance with laws and regulations if thecircumstances so warrant as determined bythe Monetary Board;

4.3. Overseeing to ascertain that laws andregulations are complied with;

4.4. Regular investigation which shall not beoftener than once a year from the last date ofexamination to determine whether aninstitution is conducting its business on a safeor sound basis: Provided, That thedeficiencies/irregularities found by ordiscovered by an audit shall be immediatelyaddressed;

4.5. Inquiring into the solvency and liquidity ofthe institution; or

4.6. Enforcing prompt corrective action.

The Bangko Sentral shall also havesupervision over the operations of andexercise regulatory powers over quasi-banks,

trust entities and other financial institutionswhich under special laws are subject toBangko Sentral supervision. .

For the purposes of this Act, quasi-banks shall refer to entities engaged in theborrowing of funds through the issuance,endorsement or assignment with recourse or

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The department head and the examiners ofthe appropriate supervising and examiningdepartment are hereby authorized toadminister oaths to any such person,employee, officer, or director of any suchentity and to compel the presentation orproduction of such books, documents, papersor records that are reasonably necessary toascertain the facts relative to the truefunctions and operations of such person orentity. Failure or refusal to comply with the

required presentation or production of suchbooks, documents, papers or records within areasonable time shall subject the personsresponsible therefore to the penal sanctionsprovided under the New Central Bank Act.

Persons or entities found to be performingbanking or quasi-banking functions withoutauthority from the Bangko Sentral shall be

subject to appropriate sanctions under theNew Central Bank Act and other applicablelaws.

Sec.7. Examination by the Bangko Sentral. The Bangko Sentral shall, when examining abank, have the authority to examine anenterprise which is wholly or majority-owned

or controlled by the bank.

CHAPTER IIIORGANIZATION, MANAGEMENTAND ADMINISTRATION OFBANKS, QUASI-BANKS AND TRUSTENTITIES

Sec.8. Organization. The Monetary Board may authorize the organization of a bank orquasi-bank subject to the followingconditions:

8.1 That the entity is a stock corporation;

8.2 That its funds are obtained from the public,which shall mean twenty (20) or morepersons; and

8.3 That the minimum capital requirementsprescribed by the Monetary Board for eachcategory of banks are satisfied.No new commercial bank shall beestablished within three (3) years from theeffectivity of this Act. In the exercise of theauthority granted herein, the Monetary Boardshall take into consideration their capability in

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terms of their financial resources andtechnical expertise and integrity. The banklicensing process shall incorporate anassessment of the bank s ownership structure, directors and senior management,its operating plan and internal controls as wellas its projected financial condition and capitalbase.

Sec.9. Issuance of Stocks. The Monetary Board may prescribe rules and regulations on

the types of stock a bank may issue,including the terms thereof and rightsappurtenant thereto to determine compliancewith laws and regulations governing capitaland equity structure of banks; Provided, Thatbanks shall issue par value stocks only.

Sec.10. Treasury Stocks. No bank shall

purchase or acquire shares of its own capitalstock or accept its own shares as a securityfor a loan, except when authorized by theMonetary Board: Provided, That in everycase the stock so purchased or acquiredshall, within six (6) months from the time of itspurchase or acquisition, be sold or disposedof at a public or private sale.

Sec.11. Foreign Stockholdings Foreign individuals and non-bank corporations mayown or control up to forty percent (40%) ofthe voting stock of a domestic bank. Thisrule shall apply to Filipinos and domestic non-bank corporations.

The percentage of foreign-owned voting

stocks in a bank shall be determined by the

citizenship of the individual stockholders in

that bank. The citizenship of the corporation

which is a stockholder in a bank shall follow

the citizenship of the controlling stockholders

of the corporation, irrespective of the place of

incorporation.

Article 12 of the Philippine Constitution-

NATIONAL ECONOMY AND PATRIMONY

Section 10. The Congress shall, uponrecommendation of the economic andplanning agency, when the national interestdictates, reserve to citizens of the Philippinesor to corporations or associations at leastsixtyper centumof whose capital is ownedby such citizens, or such higher percentage

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as Congress may prescribe, certain areas ofinvestments. The Congress shall enactmeasures that will encourage the formationand operation of enterprises whose capital iswholly owned by Filipinos.

In the grant of rights, privileges, andconcessions covering the national economyand patrimony, the State shall givepreference to qualified Filipinos.

The State shall regulate and exercise

authority over foreign investments within itsnational jurisdiction and in accordance withits national goals and priorities.

Section 95 of the New Central BankAct

Definition of Deposit Substitutes. The term "deposit substitutes" is defined as

an alternative form of obtaining fundsfrom the public, other than deposits,through the issuance, endorsement, oracceptance of debt instruments for theborrower's own account, for thepurpose of relending or purchasing ofreceivables and other obligations.

These instruments may include, butneed not be limited to, bankersacceptances, promissory notes,participations, certificates ofassignment and similar instrumentswith recourse, and repurchaseagreements. The Monetary Board shalldetermine what specific instrumentsshall be considered as depositsubstitutes for the purposes of Section94 of this Act: Provided, however, Thatdeposit substitutes of commercial,

industrial and other non-financialcompanies for the limited purpose offinancing their own needs or the needsof their agents or dealers shall not becovered by the provisions of Section 94of this Act.

Section 22 of the National Internal Revenue

Code

SEC. 22Definitions- When used in thisTitle:

(A) The term"person"means anindividual, a trust, estate or corporation

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(B) The term "corporation"shall includepartnerships, no matter how created ororganized, joint-stock companies, jointaccounts (cuentas en participacion),association, or insurance companies, butdoes not include general professionalpartnerships and a joint venture orconsortium formed for the purpose ofundertaking construction projects or engagingin petroleum, coal, geothermal and otherenergy operations pursuant to an operatingconsortium agreement under a service

contract with the Government"Generalprofessional partnerships" arepartnerships formed by persons for the solepurpose of exercising their commonprofession, no part of the income of which isderived from engaging in any trade orbusiness

(C) The term "domestic", when applied to a

corporation, means created or organized inthe Philippines or under its laws

(D) The term "foreign",when applied to acorporation, means a corporation which is notdomestic

(E) The term "nonresident citizen"means:

(1)A citizen of the Philippines whoestablishes to the satisfaction of theCommissioner the fact of his physicalpresence abroad with a definiteintention to reside therein.

(2)A citizen of the Philippines who leavesthe Philippines during the taxable yearto reside abroad, either as an immigrantor for employment on a permanent

basis.

(3) A citizen of the Philippines who worksand derives income from abroad and whoseemployment thereat requires him to bephysically present abroad most of the timeduring the taxable year.

(4) A citizen who has been previously

considered as nonresident citizen and whoarrives in the Philippines at any time duringthe taxable year to reside permanently in thePhilippines shall likewise be treated as anonresident citizen for the taxable year inwhich he arrives in the Philippines withrespect to his income derived from sourcesabroad until the date of his arrival in the

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Philippines.

(5) The taxpayer shall submit proof to theCommissioner to show his intention of

leaving the Philippines to reside permanentlyabroad or to return to and reside in thePhilippines as the case may be for purpose ofthis Section.

(F) The term"resident alien"means anindividual whose residence is within thePhilippines and who is not a citizen thereof.

(G) The term"nonresident alien"meansan individual whose residence is not withinthe Philippines and who is not a citizenthereof.

(H) The term "resident foreigncorporation"applies to a foreigncorporation engaged in trade or business

within the Philippines.

(I) The term 'nonresident foreigncorporation' applies to a foreign corporationnot engaged in trade or business within thePhilippines.

(J) The term"fiduciary"means a guardian,trustee, executor, administrator, receiver,conservator or any person acting in anyfiduciary capacity for any person.

(K) The term "withholding agent"meansany person required to deduct and withholdany tax under the provisions of Section 57.

(L) The term"shares of stock"shall includeshares of stock of a corporation, warrantsand/or options to purchase shares of stock,

as well as units of participation in apartnership (except general professionalpartnerships), joint stock companies, jointaccounts, joint ventures taxable ascorporations, associations and recreation oramusement clubs (such as golf, polo orsimilar clubs), and mutual fund certificates.

(M) The term "shareholder"shall include

holders of a share/s of stock, warrant/sand/or option/s to purchase shares of stock ofa corporation, as well as a holder of a unit ofparticipation in a partnership (except generalprofessional partnerships) in a joint stockcompany, a joint account, a taxable jointventure, a member of an association,

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recreation or amusement club (such as golf,polo or similar clubs) and a holder of a mutualfund certificate, a member in an association,joint-stock company, or insurance company.

(N) The term "taxpayer"means any personsubject to tax imposed by this Title.

(O) Theterms"including"and "includes", whenused in a definition contained in this Title,shall not be deemed to exclude other things

otherwise within the meaning of the termdefined.

(P) The term "taxable year"means thecalendar year, or the fiscal year endingduring such calendar year, upon the basis ofwhich the net income is computed under thisTitle.'Taxable year' includes, in the case of a

return made for a fractional part of a yearunder the provisions of this Title or underrules and regulations prescribed by theSecretary of Finance, upon recommendationof the commissioner, the period for whichsuch return is made.

(Q) The term "fiscal year"means anaccounting period of twelve (12) monthsending on the last day of any month otherthan December.

(R) The terms "paid or incurred"and 'paidor accrued' shall be construed according tothe method of accounting upon the basis ofwhich the net income is computed under thisTitle.

(S) The term"trade or business"includes

the performance of the functions of a publicoffice.

(T) The term "securities"means shares ofstock in a corporation and rights to subscribefor or to receive such shares.

The term includes bonds, debentures, notesor certificates, or other evidence or

indebtedness, issued by any corporation,including those issued by a government orpolitical subdivision thereof, with interestcoupons or in registered form.

(U) The term"dealer in securities"meansa merchant of stocks or securities, whether

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an individual, partnership or corporation, withan established place of business, regularlyengaged in the purchase of securities and theresale thereof to customers; that is, one who,

as a merchant, buys securities and re-sellsthem to customers with a view to the gainsand profits that may be derived therefrom.

(V) The term "bank"means every bankinginstitution, as defined in Section 2 of RepublicAct No. 337, as amended, otherwise knownas the General banking Act.

A bank may either be a commercial bank, athrift bank, a development bank, a rural bankor specialized government bank.

(W) The term"non-bank financialintermediary"means a financialintermediary, as defined in Section 2(D)(C) ofRepublic Act No. 337, as amended,otherwise known as the General Banking Act,

authorized by the Bangko Sentral ng Pilipinas(BSP) to perform quasi-banking activities.

(X) The term"quasi-bankingactivities"means borrowing funds fromtwenty (20) or more personal or corporatelenders at any one time, through the

issuance, endorsement, or acceptance ofdebt instruments of any kind other thandeposits for the borrower's own account, orthrough the issuance of certificates of

assignment or similar instruments, withrecourse, or of repurchase agreements forpurposes of relending or purchasingreceivables and other similar obligations:Provided, however, That commercial,industrial and other non-financial companies,which borrow funds through any of thesemeans for the limited purpose of financing

their own needs or the needs of their agentsor dealers, shall not be considered asperforming quasi-banking functions.

(Y) The term"deposit substitutes"shallmean an alternative from of obtaining fundsfrom the public (the term 'public' meansborrowing from twenty (20) or more individualor corporate lenders at any one time) other

than deposits, through the issuance,endorsement, or acceptance of debtinstruments for the borrowers own account,for the purpose of relending or purchasing ofreceivables and other obligations, orfinancing their own needs or the needs oftheir agent or dealer.

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These instruments may include, but need notbe limited to bankers' acceptances,promissory notes, repurchase agreements,including reverse repurchase agreements

entered into by and between the BangkoSentral ng Pilipinas (BSP) and anyauthorized agent bank, certificates ofassignment or participation and similarinstruments with recourse: Provided,however, That debt instruments issued forinterbank call loans with maturity of not morethan five (5) days to cover deficiency in

reserves against deposit liabilities, includingthose between or among banks and quasi-banks, shall not be considered as depositsubstitute debt instruments.

(Z) The term"ordinary income"includesany gain from the sale or exchange ofproperty which is not a capital asset orproperty described in Section 39(A)(1).

Any gain from the sale or exchange ofproperty which is treated or considered,under other provisions of this Title, as'ordinary income' shall be treated as gainfrom the sale or exchange of property whichis not a capital asset as defined in Section39(A)(1).

The term 'ordinary loss' includes any lossfrom the sale or exchange of property whichis not a capital asset.

Any loss from the sale or exchange ofproperty which is treated or considered,under other provisions of this Title, as'ordinary loss' shall be treated as loss fromthe sale or exchange of property which is nota capital asset.

(AA) The term"rank and file

employees"shall mean all employees whoare holding neither managerial norsupervisory position as defined under existingprovisions of the Labor Code of thePhilippines, as amended.

(BB) The term"mutual fundcompany"shall mean an open-end andclose-end investment company as defined

under the Investment Company Act.

(CC) The term"trade, business orprofession"shall not include performance ofservices by the taxpayer as an employee.

(DD) The term"regional or area

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headquarters"shall mean a branchestablished in the Philippines by multinationalcompanies and which headquarters do notearn or derive income from the Philippines

and which act as supervisory,communications and coordinating center fortheir affiliates, subsidiaries, or branches inthe Asia-Pacific Region and other foreignmarkets.

(EE) The term"regional operatingheadquarters"shall mean a branch

established in the Philippines by multinationalcompanies which are engaged in any of thefollowing services: general administration andplanning; business planning andcoordination; sourcing and procurement ofraw materials and components; corporatefinance advisory services; marketing controland sales promotion; training and personnelmanagement; logistic services; research and

development services and productdevelopment; technical support andmaintenance; data processing andcommunications; and business development.

(FF) The term"long-term deposit orinvestment certificates"shall refer to

certificate of time deposit or investment in theform of savings, common or individual trustfunds, deposit substitutes, investmentmanagement accounts and other investments

with a maturity period of not less than five (5)years, the form of which shall be prescribedby the Bangko Sentral ng Pilipinas (BSP) andissued by banks only (not by nonbankfinancial intermediaries and financecompanies) to individuals in denominations ofTen thousand pesos (P10,000) and otherdenominations as may be prescribed by the

BS.

Section 3 of the Thrift Banks Act of 1995

Sec. 3. Definition of Terms. For purposes of implementing this Act, the followingdefinitions shall apply:

(a) "Thrift banks" shall include savings and

mortgage banks, private development banks,and stock savings and loans associationsorganized under existing laws, and anybanking corporation that may be organizedfor the following purposes:

(1) Accumulating the savings ofdepositors and investing them, together withcapital loans secured by bonds, mortgages in

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real estate and insured improvementsthereon, chattel mortgage, bonds and otherforms of security or in loans for personal orhousehold finance, whether secured or

unsecured, or in financing for homebuildingand home development; in readily marketableand debt securities; in commercial papersand accounts receivables, drafts, bills ofexchange, acceptances or notes arising outof commercial transactions; and in such otherinvestments and loans which the MonetaryBoard may determine as necessary in the

furtherance of national economic objectives

(2) Providing short-term working capital,medium- and long-term financing, tobusinesses engaged in agriculture, services,industry and housing; and

(3)Providing diversified financial andallied services for its chosen market and

constituencies specially for small andmedium enterprises and individuals.

(b) "Monetary Board" shall mean theMonetary Board of the Bangko Sentral ngPilipinas.

(c) "Bangko Sentral" shall refer to the Bangko

Sentral ng Pilipinas created under RepublicAct No. 7653.

Section 3 of Rural Bank Act of 1992

Sec. 3. In furtherance of this policy, theMonetary Board of the Central Bank of thePhilippines shall formulate the necessaryrules and regulations governing theestablishment and operation of farmers andmerchants, or to cooperatives of suchfarmers and merchants and, in general, to the

people of the rural communities, and tosupervise the operation of such banks.

Definition of a Cooperative Bank underCooperative Bank Law of 2008 as amendedby RA 9520

Cooperative Bankis one organized for the

primary purpose of providing a wide range offinancial services to cooperatives and theirmembers;

ART. 23.Type and Categories of Cooperatives. (1) Types of Cooperatives Cooperatives may fall under any of the

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following types:

"(a)Credit Cooperativeis one thatpromotes and undertakes savings and

lending services among its members. Itgenerates a common pool of funds inorder to provide financial assistance toits members for productive andprovident purposes;

"(b)Consumers Cooperativeis one ofthe primary purpose of which is toprocure and distribute commodities tomembers and non-members;

"(c)Producers Cooperativeis one thatundertakes joint production whetheragricultural or industrial. It is formedand operated by its members toundertake the production andprocessing of raw materials or goods

produced by its members into finishedor processed products for sale by thecooperative to its members and non-members. Any end product or itsderivative arising from the raw materialsproduced by its members, sold in thename and for the account of thecooperative, shall be deemed a product

of the cooperative and its members;

"(d)Marketing Cooperativeis onewhich engages in the supply of

production inputs to members andmarkets their products;cralaw

"(e)Service Cooperativeis one whichengages in medical and dental care,hospitalization, transportation,insurance, housing, labor, electric lightand power, communication,professional and other services;cralaw

"(f)Multipurpose Cooperativeis onewhich combines two (2) or more of thebusiness activities of these differenttypes of cooperatives;cralaw

"(g)Advocacy Cooperativeis a primarycooperative which promotes andadvocates cooperativism among itsmembers and the public throughsocially-oriented projects, educationand training, research andcommunication, and other similaractivities to reach out to its intendedbeneficiaries;cralaw

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"(h)Agrarian Reform Cooperativeisone organized by marginal farmersmajority of which are agrarian reformbeneficiaries for the purpose of

developing an appropriate system ofland tenure, land development, landconsolidation or land management inareas covered by agrarianreform;cralaw

"(i)Cooperative Bankis one organizedfor the primary purpose of providing awide range of financial services tocooperatives and their members;cralaw

"(j)Dairy Cooperativeis one whosemembers are engaged in theproduction of fresh milk which may beprocessed and/or marketed as dairyproducts;cralaw

"(k)Education Cooperativeis oneorganized for the primary purpose ofowning and operating licensededucational institutions notwithstandingthe provisions of Republic Act No.9155, otherwise known as theGovernance of Basic Education Act of2001;cralaw

"(l)Electric Cooperativeis oneorganized for the primary purposed ofundertaking power generations, utilizingrenewable energy sources, including

hybrid systems, acquisition andoperation of subtransmission ordistribution to its householdmembers;cralaw

"(m)Financial Service Cooperativeisone organized for the primary purposeof engaging in savings and creditservices and other financialservices;cralaw

"(n)Fishermen Cooperativeis oneorganized by marginalized fishermen inlocalities whose products are marketedeither as fresh or processedproducts;cralaw

"(o)Health Services Cooperativeis oneorganized for the primary purpose ofproviding medical, dental and otherhealth services;cralaw

"(p)Housing Cooperativeis oneorganized to assist or provide access tohousing for the benefit of its regular

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members who actively participate in thesavings program for housing. It is co-owned and controlled by itsmembers;cralaw

"(q)Insurance Cooperativeis oneengaged in the business of insuring lifeand poverty of cooperatives and theirmembers;cralaw

"(r)Transport Cooperativeis one whichincludes land and sea transportation,limited to small vessels, as defined orclassified under the Philippine maritimelaws, organized under the provisions ofthis Code;cralaw

"(s)Water Service Cooperativeis oneorganized to own, operate and managewaters systems for the provision anddistribution of potable water for its

members and their households;cralaw

"(t)Workers Cooperativeis oneorganized by workers, including theself-employed, who are at same timethe members and owners of theenterprise. Its principal purpose is toprovide employment and business

opportunities to its members andmanage it in accordance withcooperative principles; andcralaw

"(u) Other types of cooperative as maybe determined by the Authority.

"(2)Categories of CooperativeCooperatives shall be categorized accordingto membership and territorial considerationsas follows:

"(a) In terms of membership,

cooperative shall be categorized into:

"(i)Primary The members ofwhich are natural persons;cralaw

"(ii)Secondary The members ofwhich are primaries; andcralaw

"(iii)Tertiary The members of

which are secondarycooperatives; and

"(b) In terms of territory, cooperativesshall be categorized according to areasof operations which may or may notcoincide with the political subdivisions

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of the country.

"ART. 24.Functions of a Federation ofCooperatives. A federation of cooperatives

shall undertake the following functions:

"(a) To carry on any cooperativeenterprise authorized under Article 6that complements augments, orsupplements but does not conflict,complete with, nor supplant thebusiness or economic activities of itsmembers;

"(b) To carry on, encourage, and assisteducational and advisory work relatingto its member cooperatives;

"(c) To render services designed toencourage simplicity, efficiency, andeconomy in the conduct of the businessof its member cooperatives and tofacilitate the implementation of theirbookkeeping, accounting, and othersystems and procedures;

"(d) To print, publish, and circulate anynewspaper or other publication in theinterest of its member cooperatives and

enterprises;

"(e) To coordinate and facilitate theactivities of its member cooperatives;

"(f) To enter into joint ventures withnational or international cooperatives ofother countries in the manufacture andsale of products and/or services in thePhilippines and abroad; and

"(g) To perform such other functions asmay be necessary to attain its

objectives.

"A federation of cooperatives may beregistered by carrying out the formalities forregistration of a cooperative.

"Registered cooperatives may organize afederation according to the type of businessactivity engaged in by the cooperatives.

Section 3 of the CHARTER OF THE AL-AMANAH ISLAMIC INVESTMENT BANK OFTHE PHILIPPINES

Republic Act No. 6848- AN ACT PROVIDING

FOR THE 1989 CHARTER OF THE AL-

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AMANAH ISLAMIC INVESTMENT BANK OF

THE PHILIPPINES, AUTHORIZING ITS

CONDUCT OF ISLAMIC BANKING

BUSINESS, AND REPEALING FOR THISPURPOSE PRESIDENTIAL DECREE

NUMBERED TWO HUNDRED AND SIXTY-

FOUR AS AMENDED BY PRESIDENTIAL

DECREE NUMBERED FIVE HUNDRED

AND FORTY-TWO (CREATING THE

PHILIPPINE AMANAH BANK)

Section 3.Purpose and Basis.- The primarypurpose of the Islamic Bank shall be topromote and accelerate the socio-economicdevelopment of the Autonomous Region byperforming banking, financing and investmentoperations and to establish and participate inagricultural, commercial and industrialventures based on the Islamic concept ofbanking.

All business dealings and activities of theIslamic Bank shall be subject to the basicprinciples and rulings of Islamic Shari'a withinthe purview of the aforementioned declaredpolicy. Any zakat or "ithe" paid by the IslamicBank on behalf of its shareholders and

depositors shall be its obligation toappropriate said zakat fund and to disburse itin legitimate channels to be ascertained firstby the Shari'a Advisory Council.

Section 7.Authorized Capital Stock.- The

authorized capital stock of the Islamic Bank

shall be One billion pesos (P1,000,000,000)

divided into ten million par value shares of

One hundred pesos each. All shares are

nominative and indivisible. The subscription

to and ownership of such shares, including

the transfer thereof to third parties, shall be

limited to persons and entities who subscribe

to the concept of Islamic banking.

Corporation Code- Batas Pambansa Blng. 68

Sec. 9.Treasury shares.- Treasury shares

are shares of stock which have been issued

and fully paid for, but subsequently

reacquired by the issuing corporation by

purchase, redemption, donation or through

some other lawful means. Such shares may

again be disposed of for a reasonable price

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fixed by the board of directors.

Sec. 25.Corporate officers, quorum.-Immediately after their election, the directors

of a corporation must formally organize bythe election of a president, who shall be adirector, a treasurer who may or may not be adirector, a secretary who shall be a residentand citizen of the Philippines, and such otherofficers as may be provided for in the by-laws. Any two (2) or more positions may beheld concurrently by the same person, exceptthat no one shall act as president andsecretary or as president and treasurer at thesame time.

The directors or trustees and officers to beelected shall perform the duties enjoined onthem by law and the by-laws of thecorporation. Unless the articles ofincorporation or the by-laws provide for a

greater majority, a majority of the number ofdirectors or trustees as fixed in the articles ofincorporation shall constitute a quorum forthe transaction of corporate business, andevery decision of at least a majority of thedirectors or trustees present at a meeting atwhich there is a quorum shall be valid as acorporate act, except for the election of

officers which shall require the vote of amajority of all the members of the board.

Directors or trustees cannot attend or vote by

proxy at board meetings.

TITLE XIICLOSE CORPORATIONS

Sec. 96. Definition and applicability of Title. -A close corporation, within the meaning ofthis Code, is one whose articles ofincorporation provide that: (1) All the

corporation's issued stock of all classes,exclusive of treasury shares, shall be held ofrecord by not more than a specified numberof persons, not exceeding twenty (20); (2) allthe issued stock of all classes shall besubject to one or more specified restrictionson transfer permitted by this Title; and (3)The corporation shall not list in any stock

exchange or make any public offering of anyof its stock of any class. Notwithstanding theforegoing, a corporation shall not be deemeda close corporation when at least two-thirds(2/3) of its voting stock or voting rights isowned or controlled by another corporationwhich is not a close corporation within themeaning of this Code.

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Any corporation may be incorporated as aclose corporation, except mining or oilcompanies, stock exchanges, banks,

insurance companies, public utilities,educational institutions and corporationsdeclared to be vested with public interest inaccordance with the provisions of this Code.

The provisions of this Title shall primarilygovern close corporations: Provided, That theprovisions of other Titles of this Code shall

apply suppletorily except insofar as this Titleotherwise provides.

CIVIL CODE: Article 1953-1980

CHAPTER 2SIMPLE LOAN OR MUTUUM

Art. 1953. A person who receives a loan ofmoney or any other fungible thing acquiresthe ownership thereof, and is bound to pay tothe creditor an equal amount of the samekind and quality. (1753a)

Art. 1954. A contract whereby one persontransfers the ownership of non-fungible things

to another with the obligation on the part ofthe latter to give things of the same kind,quantity, and quality shall be considered abarter. (n)

Art. 1955. The obligation of a person whoborrows money shall be governed by theprovisions of Articles 1249 and 1250 of thisCode.

If what was loaned is a fungible thing otherthan money, the debtor owes another thing ofthe same kind, quantity and quality, even if it

should change in value. In case it isimpossible to deliver the same kind, its valueat the time of the perfection of the loan shallbe paid. (1754a)

Art. 1956. No interest shall be due unless ithas been expressly stipulated in writing.(1755a)

Art. 1957. Contracts and stipulations, underany cloak or device whatever, intended tocircumvent the laws against usury shall bevoid. The borrower may recover inaccordance with the laws on usury. (n)

Art. 1958. In the determination of the interest,

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if it is payable in kind, its value shall beappraised at the current price of the productsor goods at the time and place of payment.(n)

Art. 1959. Without prejudice to the provisionsof Article 2212, interest due and unpaid shallnot earn interest. However, the contractingparties may by stipulation capitalize theinterest due and unpaid, which as addedprincipal, shall earn new interest. (n)

Art. 1960. If the borrower pays interest when

there has been no stipulation therefor, theprovisions of this Code concerning solutioindebiti, or natural obligations, shall beapplied, as the case may be. (n)

Art. 1961. Usurious contracts shall begoverned by the Usury Law and other speciallaws, so far as they are not inconsistent withthis Code. (n)

Title XII. - DEPOSIT

CHAPTER 1DEPOSIT IN GENERAL AND ITS

DIFFERENT KINDS

Art. 1962. A deposit is constituted from themoment a person receives a thing belongingto another, with the obligation of safely

keeping it and of returning the same. If thesafekeeping of the thing delivered is not theprincipal purpose of the contract, there is nodeposit but some other contract. (1758a)

Art. 1963. An agreement to constitute adeposit is binding, but the deposit itself is notperfected until the delivery of the thing. (n)

Art. 1964. A deposit may be constitutedjudicially or extrajudicially. (1759)

Art. 1965. A deposit is a gratuitous contract,except when there is an agreement to thecontrary, or unless the depositary is engagedin the business of storing goods. (1760a)

Art. 1966. Only movable things may be theobject of a deposit. (1761)

Art. 1967. An extrajudicial deposit is eithervoluntary or necessary. (1762)

CHAPTER 2

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VOLUNTARY DEPOSIT

SECTION 1. - General Provisions

Art. 1968. A voluntary deposit is that whereinthe delivery is made by the will of thedepositor. A deposit may also be made bytwo or more persons each of whom believeshimself entitled to the thing deposited with athird person, who shall deliver it in a propercase to the one to whom it belongs. (1763)

Art. 1969. A contract of deposit may beentered into orally or in writing. (n)

Art. 1970. If a person having capacity tocontract accepts a deposit made by one whois incapacitated, the former shall be subjectto all the obligations of a depositary, and maybe compelled to return the thing by theguardian, or administrator, of the person who

made the deposit, or by the latter himself if heshould acquire capacity. (1764)

Art. 1971. If the deposit has been made by acapacitated person with another who is not,the depositor shall only have an action torecover the thing deposited while it is still inthe possession of the depositary, or to

compel the latter to pay him the amount bywhich he may have enriched or benefitedhimself with the thing or its price. However, ifa third person who acquired the thing acted in

bad faith, the depositor may bring an actionagainst him for its recovery. (1765a)

SECTION 2. - Obligations of the DepositaryArt. 1972. The depositary is obliged to keepthe thing safely and to return it, whenrequired, to the depositor, or to his heirs andsuccessors, or to the person who may havebeen designated in the contract. Hisresponsibility, with regard to the safekeepingand the loss of the thing, shall be governedby the provisions of Title I of this Book.

If the deposit is gratuitous, this fact shall betaken into account in determining the degree

of care that the depositary must observe.(1766a)

Art. 1973. Unless there is a stipulation to thecontrary, the depositary cannot deposit thething with a third person. If deposit with athird person is allowed, the depositary isliable for the loss if he deposited the thing

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with a person who is manifestly careless orunfit. The depositary is responsible for thenegligence of his employees. (n)

Art. 1974. The depositary may change theway of the deposit if under the circumstanceshe may reasonably presume that thedepositor would consent to the change if heknew of the facts of the situation. However,before the depositary may make suchchange, he shall notify the depositor thereofand wait for his decision, unless delay wouldcause danger. (n)

Art. 1975. The depositary holding certificates,bonds, securities or instruments which earninterest shall be bound to collect the latterwhen it becomes due, and to take such stepsas may be necessary in order that thesecurities may preserve their value and therights corresponding to them according to

law.

The above provision shall not apply tocontracts for the rent of safety deposit boxes.(n)

Art. 1976. Unless there is a stipulation to thecontrary, the depositary may commingle grain

or other articles of the same kind and quality,in which case the various depositors shallown or have a proportionate interest in themass. (n)

Art. 1977. The depositary cannot make use ofthe thing deposited without the expresspermission of the depositor.

Otherwise, he shall be liable for damages.

However, when the preservation of the thingdeposited requires its use, it must be used

but only for that purpose. (1767a)

Art. 1978. When the depositary haspermission to use the thing deposited, thecontract loses the concept of a deposit andbecomes a loan or commodatum, exceptwhere safekeeping is still the principalpurpose of the contract.

The permission shall not be presumed, andits existence must be proved. (1768a)

Art. 1979. The depositary is liable for the lossof the thing through a fortuitous event:

(1) If it is so stipulated;

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(2) If he uses the thing without thedepositor's permission;

(3) If he delays its return;

(4) If he allows others to use it, eventhough he himself may have beenauthorized to use the same. (n)

Art. 1980. Fixed, savings, and currentdeposits of money in banks and similarinstitutions shall be governed by theprovisions concerning simple loan. (n)

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Documents

General Banking Notes